Family Dollar Expands Store Brands

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January 17, 2012

Family Dollar plans to add new private label goods, expanding food and health and beauty care categories as shoppers’ appetite for store brands grows.

“This quarter, we will add 300 new food items in all stores, including about 100 new private brand items,” said Howard Levine, executive chairman and CEO. “These additions will position us to capture more trips and reinforce our value proposition.”

Family Dollar will debut the Family Wellness brand in OTC medications, as the chain continues to grow its health and beauty care store brand assortment.

“HBA is a category with strong potential to drive both trips and higher tickets,” Levine told analysts during a conference call to discuss first quarter results. “We are very pleased with the customer response to our broader HBA assortment and intend to add around 150 new items to the assortment this year.”

Sales of consumables have been steadily growing as a percentage of total store sales at Family Dollar for the past five years. “Five years ago, consumables were approximately 61 percent of sales compared to 70 percent in the first quarter of fiscal 2012,” he told analysts. “For that same period, gross margin was 34.2 percent of sales compared with 35.3 percent of sales in the quarter just ended.” The higher margin and benefits of direct sourcing of private label goods are helping Family Dollar to maintain margins.

Total private label penetration continues to grow for the chain. Store brand penetration was 25 percent for the prior fiscal year and 16 percent for consumables alone. “In the first quarter, we continued to see great growth in private brands,” said Levine. “That trajectory is continuing. Our near-term goal is to get penetration of consumable private brands up to 20 percent, and we are certainly well on our way.”

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