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1Q14 Earnings
Conference Call
January 9, 2014
A Word of Caution
Certain statements contained in this presentation which are not historical facts are forward-looking
statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform
Act of 1995. These forward-looking statements address the Company’s plans, activities or events
which the Company expects will or may occur in the future.
A number of important factors could cause actual results to differ materially from those expressed
in any forward-looking statements. Such factors, risks and uncertainties are set forth under the
headings “Cautionary Statement Regarding Forward-Looking Statements,” or “Risk Factors” or
"Management’s Discussion and Analysis of Financial Condition and Results of Operation" in the
Company’s annual report on Form 10-K and quarterly reports on Form 10-Q filed or to be filed,
respectively, and which are expressly incorporated herein by reference.
You are cautioned not to place undue reliance on these forward-looking statements, which speak
only as of January 9, 2014. The Company does not undertake to update or revise its forwardlooking statements even if experience or future changes make it clear that projected results
expressed or implied in such statements will not be realized, except as may be required by law.

2
Agenda
Introduction & Safe Harbor

Kiley Rawlins, CFA

Opening Remarks

Howard Levine

Financial Review and Outlook

Mary Winston

Closing Remarks

Howard Levine

Questions & Answers

Howard Levine
Mary Winston

VP – IR & Communications

Chairman & CEO

Chief Financial Officer

3
Opening Remarks

Howard Levine
Chairman & CEO
Key Investments
•
•
•
•

Acceleration of new store openings
Chain-wide renovation program
Expansion of consumables categories
Margin-driving initiatives
– Global sourcing
– Private brands

5
Moving Forward
Accomplishments
– Expanded market share
– Customer satisfaction
scores
– Reduced store manager
turnover

Priorities
– Stabilizing key
businesses
– Re-energizing our focus
on value
– Re-accelerating traffic

6
Pressures Facing our Customers
• Elevated unemployment levels
• Higher taxes
• Reductions to key government assistance
programs
– SNAP benefits
– Unemployment benefits

• Healthcare uncertainties
7
Long Track Record of Success
• Focus on providing customers with great
values
• Ability and willingness to adapt to near-term
challenges while investing in the future

8
FY14 Objectives
•
•
•
•

Refine and enhance assortment
Strengthen value proposition
Re-accelerate traffic
Reduce infrastructure costs

9
Digesting Significant Changes
• 1,000 new Food and
HBA SKUs
• Tobacco
• Significant fixture and
layout changes

•
•
•
•
•
•

More trips
Greater share of wallet
Margin pressure
Store manager turnover
Shrink
Inventory productivity

10
Moving Forward
• Refine and enhance assortment
– Food
– Household

• Investments to strengthen value proposition
• Re-accelerate traffic
– Emphasize EDLP
– Optimize marketing tools

• Reduce costs
11
Investments to Support Growth
• Pallet delivery program
• Renovations
• New stores

12
Management Changes
• Jason Reiser promoted to Chief Merchandising Officer
– Joined Family Dollar in July 2013 as SVP, Merchandising
– Promoted in October 2013 to Lead Merchandising Officer

• President & COO Michael Bloom leaving Family Dollar

13
Financial Review and
Outlook
Mary Winston
CFO
1Q14 Highlights
• Results in-line with previously provided guidance
• Total net sales increase 3.2%
• Comparable store sales decrease 2.8%
– Cycling strong consumables sales growth
– Customers face continued financial challenges
– Intense promotional environment

• Earnings per diluted share of $0.68
– Gross margin expansion

15
First Quarter Revenues
Net Sales
(billions)

Comparable Store Sales Growth

$2.5

6.6%

$2.4

-2.8%
1Q13

1Q14

1Q13

1Q14
16
First Quarter Gross Profit
Gross Margin Trends

Improvements

$900

• Higher initial markups
• Lower freight costs

$800

(Gross Profit ($M)

$700
$600

36.1% 36.0%

Headwinds

35.3%

$500

34.1% 34.3%

$400
$300
$200
$100

• Mix pressure
• Higher inventory
shrinkage
• Higher markdowns

$0
1Q10

1Q11

1Q12

GM$

1Q13

1Q14

GM Rate
17
Sales Mix Trends
Category Sales Mix

Category Sales Mix

(% of Sales)

(% of Sales)

9.1%
7.8%
9.0%

72.5%

+170 bps

4Q12

74.2%

73.9%

8.6%
6.9%
9.6%

8.8%
7.4%
10.0%

4Q13

9.4%
8.6%
9.5%

1Q13

+100 bps

74.9%

1Q14

Consumables

Home Products

Consumables

Home Products

Apparel & Accessories

Seasonal & Electronics

Apparel & Accessories

Seasonal & Electronics
18
First Quarter SG&A Expense
SG&A Trends

Leverage

$800
$700

30.1%
29.9%

SG&A Expense ($M)

$600
$500

29.5%
29.2%

$400
$300

28.9%

• Advertising
• Insurance
• Incentive
compensation

De-leverage

$200

• Store occupancy
• Store labor

$100
$0

1Q10

SG&A

1Q11

1Q12

1Q13

1Q14

SG&A (% of Sales)
19
First Quarter Earnings Results
(in millions except for per share
amounts)

1Q13

1Q14

Change

Net Income

$80.3

$78.0

-2.8%

Diluted Earnings per
Share

$0.69

$0.68

-1.4%

Weighted average
shares - diluted

116.2

115.1

20
$250
$225

$210

$200

(thousands)

$175

$205

$183

$154

$166

$150

• Anniversary of FY12
consumables expansion
• Well-managed
discretionary inventories

$125
$100
$75
$50
$25
$0

1Q10 1Q11 1Q12 1Q13 1Q14
21
Capital Expenditures
$225

$196

$200
$175

(millions)

$150

$131

$125

$113

$100

• New store openings
($43M)
• Renovation program
($31M)
• Corporate/ IT ($20M)
• Existing stores ($14M)

$75
$50

$39

$39

1Q10

1Q11

$25

$0

1Q12

1Q13

1Q14

22
Returning Capital to Shareholders
$300

(millions)

$200

258
$100

$0

125
25
19
1Q10

20
1Q11
Dividends

27
21

25
24

1Q12
1Q13
Share Repurchases

30
1Q14

23
Outlook*
2Q14
Total Sales^

Low-single-digit growth

Comparable Store Sales

Low-single-digit decline

Gross Margin

Expansion

SG&A Expense

De-leverage

Diluted Earnings per Share

$0.85 - $0.95

*As provided in earnings press release dated January 9, 2014
^Excluding impact of the extra week in 2Q13

24
Outlook*
FY14

Total Sales^
Comparable Store Sales

Low-to-mid-single-digit growth
Low-single-digit decline

Gross Margin

Flat

SG&A Expense

De-leverage

Tax Rate

36% - 36.5%

Diluted Earnings per Share

$3.25 – $3.55

Capital expenditures

$450M - $500M

Sale-leaseback transactions

$200M - $250M

Share repurchases

~$250M

*As provided in earnings press release dated January 9, 2014
^Excluding impact of the extra week in FY13
25
1Q14 Earnings
Conference Call
January 9, 2014

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Mihir Menda - Member of Supervisory Board at RMZ
 

Q1 2014 Family Dollar Stores Earnings Conference Call Presentation

  • 2. A Word of Caution Certain statements contained in this presentation which are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements address the Company’s plans, activities or events which the Company expects will or may occur in the future. A number of important factors could cause actual results to differ materially from those expressed in any forward-looking statements. Such factors, risks and uncertainties are set forth under the headings “Cautionary Statement Regarding Forward-Looking Statements,” or “Risk Factors” or "Management’s Discussion and Analysis of Financial Condition and Results of Operation" in the Company’s annual report on Form 10-K and quarterly reports on Form 10-Q filed or to be filed, respectively, and which are expressly incorporated herein by reference. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of January 9, 2014. The Company does not undertake to update or revise its forwardlooking statements even if experience or future changes make it clear that projected results expressed or implied in such statements will not be realized, except as may be required by law. 2
  • 3. Agenda Introduction & Safe Harbor Kiley Rawlins, CFA Opening Remarks Howard Levine Financial Review and Outlook Mary Winston Closing Remarks Howard Levine Questions & Answers Howard Levine Mary Winston VP – IR & Communications Chairman & CEO Chief Financial Officer 3
  • 5. Key Investments • • • • Acceleration of new store openings Chain-wide renovation program Expansion of consumables categories Margin-driving initiatives – Global sourcing – Private brands 5
  • 6. Moving Forward Accomplishments – Expanded market share – Customer satisfaction scores – Reduced store manager turnover Priorities – Stabilizing key businesses – Re-energizing our focus on value – Re-accelerating traffic 6
  • 7. Pressures Facing our Customers • Elevated unemployment levels • Higher taxes • Reductions to key government assistance programs – SNAP benefits – Unemployment benefits • Healthcare uncertainties 7
  • 8. Long Track Record of Success • Focus on providing customers with great values • Ability and willingness to adapt to near-term challenges while investing in the future 8
  • 9. FY14 Objectives • • • • Refine and enhance assortment Strengthen value proposition Re-accelerate traffic Reduce infrastructure costs 9
  • 10. Digesting Significant Changes • 1,000 new Food and HBA SKUs • Tobacco • Significant fixture and layout changes • • • • • • More trips Greater share of wallet Margin pressure Store manager turnover Shrink Inventory productivity 10
  • 11. Moving Forward • Refine and enhance assortment – Food – Household • Investments to strengthen value proposition • Re-accelerate traffic – Emphasize EDLP – Optimize marketing tools • Reduce costs 11
  • 12. Investments to Support Growth • Pallet delivery program • Renovations • New stores 12
  • 13. Management Changes • Jason Reiser promoted to Chief Merchandising Officer – Joined Family Dollar in July 2013 as SVP, Merchandising – Promoted in October 2013 to Lead Merchandising Officer • President & COO Michael Bloom leaving Family Dollar 13
  • 15. 1Q14 Highlights • Results in-line with previously provided guidance • Total net sales increase 3.2% • Comparable store sales decrease 2.8% – Cycling strong consumables sales growth – Customers face continued financial challenges – Intense promotional environment • Earnings per diluted share of $0.68 – Gross margin expansion 15
  • 16. First Quarter Revenues Net Sales (billions) Comparable Store Sales Growth $2.5 6.6% $2.4 -2.8% 1Q13 1Q14 1Q13 1Q14 16
  • 17. First Quarter Gross Profit Gross Margin Trends Improvements $900 • Higher initial markups • Lower freight costs $800 (Gross Profit ($M) $700 $600 36.1% 36.0% Headwinds 35.3% $500 34.1% 34.3% $400 $300 $200 $100 • Mix pressure • Higher inventory shrinkage • Higher markdowns $0 1Q10 1Q11 1Q12 GM$ 1Q13 1Q14 GM Rate 17
  • 18. Sales Mix Trends Category Sales Mix Category Sales Mix (% of Sales) (% of Sales) 9.1% 7.8% 9.0% 72.5% +170 bps 4Q12 74.2% 73.9% 8.6% 6.9% 9.6% 8.8% 7.4% 10.0% 4Q13 9.4% 8.6% 9.5% 1Q13 +100 bps 74.9% 1Q14 Consumables Home Products Consumables Home Products Apparel & Accessories Seasonal & Electronics Apparel & Accessories Seasonal & Electronics 18
  • 19. First Quarter SG&A Expense SG&A Trends Leverage $800 $700 30.1% 29.9% SG&A Expense ($M) $600 $500 29.5% 29.2% $400 $300 28.9% • Advertising • Insurance • Incentive compensation De-leverage $200 • Store occupancy • Store labor $100 $0 1Q10 SG&A 1Q11 1Q12 1Q13 1Q14 SG&A (% of Sales) 19
  • 20. First Quarter Earnings Results (in millions except for per share amounts) 1Q13 1Q14 Change Net Income $80.3 $78.0 -2.8% Diluted Earnings per Share $0.69 $0.68 -1.4% Weighted average shares - diluted 116.2 115.1 20
  • 21. $250 $225 $210 $200 (thousands) $175 $205 $183 $154 $166 $150 • Anniversary of FY12 consumables expansion • Well-managed discretionary inventories $125 $100 $75 $50 $25 $0 1Q10 1Q11 1Q12 1Q13 1Q14 21
  • 22. Capital Expenditures $225 $196 $200 $175 (millions) $150 $131 $125 $113 $100 • New store openings ($43M) • Renovation program ($31M) • Corporate/ IT ($20M) • Existing stores ($14M) $75 $50 $39 $39 1Q10 1Q11 $25 $0 1Q12 1Q13 1Q14 22
  • 23. Returning Capital to Shareholders $300 (millions) $200 258 $100 $0 125 25 19 1Q10 20 1Q11 Dividends 27 21 25 24 1Q12 1Q13 Share Repurchases 30 1Q14 23
  • 24. Outlook* 2Q14 Total Sales^ Low-single-digit growth Comparable Store Sales Low-single-digit decline Gross Margin Expansion SG&A Expense De-leverage Diluted Earnings per Share $0.85 - $0.95 *As provided in earnings press release dated January 9, 2014 ^Excluding impact of the extra week in 2Q13 24
  • 25. Outlook* FY14 Total Sales^ Comparable Store Sales Low-to-mid-single-digit growth Low-single-digit decline Gross Margin Flat SG&A Expense De-leverage Tax Rate 36% - 36.5% Diluted Earnings per Share $3.25 – $3.55 Capital expenditures $450M - $500M Sale-leaseback transactions $200M - $250M Share repurchases ~$250M *As provided in earnings press release dated January 9, 2014 ^Excluding impact of the extra week in FY13 25