family dollar annual report 2008
TRANSCRIPT
Post Office Box 1017 / Charlotte, North Carolina 28201-1017 / www.familydollar.com
corporate profile Family Dollar is a chain of more than 6,500 stores. Our merchandise
strategy is simple: offer quality merchandise at everyday low prices in easy-to-shop
neighborhood locations.
Family Dollar stores are located in a 44-state area ranging northeast to Maine, southeast
to Florida, as far northwest as Idaho and southwest to Arizona. On average, our stores
range in size from 7,500 square feet to 9,000 square feet and most are operated in leased
facilities. This relatively small size enables us to open new stores in rural areas, small
towns and large urban neighborhoods.
Our headquarters are located in Matthews, North Carolina, just outside of Charlotte.
We operate automated, full-service distribution centers in Matthews; West Memphis,
Arkansas; Front Royal, Virginia; Duncan, Oklahoma; Morehead, Kentucky; Maquoketa,
Iowa; Odessa, Texas; Marianna, Florida; and Rome, New York.
Family Dollar has been a publicly held corporation since 1970 and its Common Stock is
listed on the New York Stock Exchange under the ticker symbol: FDO.
family dollar mission statement For Our Customers: A compelling place to
shop – by providing convenience and low prices. For Our Associates: A compelling
place to work – by providing exceptional opportunities and rewards for achievement.
For Our Investors: A compelling place to invest – by providing outstanding returns.
My Family. My Family Dollar.Since opening our first store in 1959, Family Dollar has provided our customers with value and convenience.
For nearly a half a century, we have invested considerable resources to increase our understanding of our
customer to better meet her needs. To better reflect our commitment to our customer, we set out to refresh the
Family Dollar brand. Our new logo and tag line,
reinforce our promise of providing customers with value and convenience and emphasize our focus on families.
Our new brand illustrates our customer’s emotional tie with Family Dollar and our commitment to meeting
her needs. Our customers love our stores and consider us to be part of their families. When Mom walks into
her neighborhood Family Dollar, we know she’ll find what she needs for her home and family.
In the face of tough economic headwinds, our mission to be a compelling place to shop, work and invest is
more important than ever. Our customer knows she can count on us for value and convenience, so we’re
focused on making sure we’re stocking the things she uses everyday. Family Dollar is developing talented
teams focused on delivering strong performance. It takes the right people working together to effectively rise
to the challenges we face in today’s environment. Although we’re not immune to external economic pressures,
we are committed to managing risk and containing costs while also maintaining our commitment to investing
in the people, process and technology that move our business forward.
As we begin our 50th year of providing value and convenience to our customers, we will
continue to focus our efforts to be a compelling place to shop for our customers, to work
for our Associates and to invest for our shareholders.
Howard R. LevineChairman and Chief Executive Officer
OCTOBER 2008
The manager
at my Family Dollar knows my children
and me. She treats us like family. The
store is clean and the Associates are
friendly and helpful. When I shop at my
Family Dollar I can get the things I need
to take care of my family.
My Family. My Family Dollar.Our customer takes great pride in providing for her family, and we want her
to feel good about where she shops. Whether she’s buying school supplies and
snacks for her kids or splurging on some new Bugle Boy® apparel, we have
everything she needs. We’re working hard to make our stores easier to shop so
Mom can get in and out quickly and spend more time with her family. She likes
shopping at Family Dollar so much she refers to it as “My Family Dollar.”
In 2008, we introduced a new logo and tagline to build on our strong brand
image. This new logo conveys our commitment to providing value and
convenience and the importance we place on serving the needs of families.
At Family Dollar we help customers care for their families. With a broad range of
products from food and household products to housewares and apparel, Family
Dollar helps Mom get everything she needs for her home and family.
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AutomotiveCar care products that won’t break the bank. Find what you need to keep your automobile looking good and running great.
ApparelBugle Boy®, an authentic American brand that offers quality, value and style for the entire family.
SeasonalSomething for every season. From back-to-school to Valentine’s Day, you can count on Family Dollar for the items you need to celebrate the season at everyday low prices.
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Household CleanersWhether it’s a nasty spill or your regular spring cleaning, you’ll find the products you use daily at Family Dollar.
Household PaperPaper towels, bath tissue and more. Family Dollar stocks the products you need at a fraction of the cost of other retailers.
Expanded FoodFeed the whole family and don’t spend a lot of money to do it. Family Dollar carries trusted national brands as well as top quality private label products.
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I know
when I shop at Family Dollar I can
get everything I need for my family
without spending a lot of money.
Even my mom can get a toy for her
granddaughter. I’m looking for good
values, and I know I can find them at
my Family Dollar.
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Value For Our CustomersAt Family Dollar, providing both value and convenience sets us apart from
other retailers. We know our busy customer works hard to take care of her family.
She wants to provide them with quality products and not spend a lot to do it, so
she shops at Family Dollar.
Today, value is more important than ever. In a challenging economy, people need
their money to go a little further. At Family Dollar, we know our customers
shouldn’t have to give up the quality they deserve. That’s why we work with our
vendor partners to ensure that the products our customers use every day can be
purchased at the lowest prices. Whether Mom needs food, cleaning products or
clothing for her family, she knows she can shop at Family Dollar and be confident
that she’s getting quality products at a great price.
When Riley’s
ready for his walk, we always stop by my
Family Dollar on the way to the park.
He gets a treat, and I refresh the minutes
on my prepaid cell phone. Family Dollar is
right around the corner, so it’s easy
to run in and get what I need.
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Convenience For Our CustomersAt Family Dollar, our vision is to be the best small-format convenience and value
retailer serving the needs of families in our neighborhoods. Convenience plays
an important role in our success. We want our customers to be able to get in,
get what they need and get out of our stores quickly. With small, neighborhood
stores, we’re able to provide our customers with quality merchandise at affordable
prices right where they live. From pet supplies to snacks for a day in the park,
it’s easy to get what you need … when you need it … from your local Family Dollar.
Our customer wants to spend more time with her family and less time
shopping. Being convenient means providing our customers with easy access
from home or work. It also means a quick in and out shopping experience.
Our easy-to-shop neighborhood locations make it easy for Mom to get
what she needs, close to home, to take care of her family.
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Pet FoodCats and dogs deserve quality at low prices, too. Family Dollar has food, toys and other pet care essentials that won’t break the bank.
ElectronicsStay in touch with friends and family. At Family Dollar we sell prepaid phone services and other consumer electronics.
Snack FoodsLooking for a quick bite to tide you over or just some munchies? Family Dollar has what you need right around the corner.
Career PathsDeveloping talent with clear career paths helps ensure the future growth and success of the Company.
TalentAt Family Dollar we recognize the contributions individuals can make to the overall success of the Company.
TeamworkFrom the corporate headquarters to distribution and the stores, we’re all a team working to make Family Dollar successful in the neighborhoods we serve.
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I’m the
Store Manager and this is my team.
Customer service is our focus. We
take pride in the way we run our
store. We know our customers
and are proud to provide them
with great value and convenience.
Because we all live in the area, this
is truly a neighborhood store. I love
working with my team, and I love
working at Family Dollar.
My Future. My Family Dollar.At Family Dollar, our mission is to be a compelling place to work for our Associates.
This means we strive to hire, train, develop and retain a highly talented team
that’s focused on delivering strong performance. Through succession planning,
expanded training, job readiness and leadership development, we’re working to
increase retention of our Associates while building a stronger culture.
The growth and success of the Company depend on the individual contribution
of each and every Associate. Whether you work in a store, at the distribution
center or at the corporate office, you’ll have the opportunity to work as a team
member supporting the goals of our growing Fortune 500 Company.
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Investing For Our ShareholdersProviding value and convenience is what sets Family Dollar apart from other retailers and what positions us well
in today’s environment of rising unemployment, strong inflationary pressures and volatile energy prices.
Being a compelling place to invest means delivering sustainable shareholder value through income growth and effective capital
deployment. We are investing to build long-term capabilities and lower our cost structure. Through our supply chain optimization
initiative, Project Accelerate, we’ve enhanced our merchandising capabilities and improved the return on one of our largest assets –
inventory. By leveraging our buying power and merchandising capabilities and by more effectively using new technology and
new analytical tools, we intend to lower administrative expenses and maintain everyday low prices for our customers.
To deliver financial returns to our shareholders, we intend to continue to invest aggressively to increase our relevancy to
our customers while mitigating risk and managing costs. Hiring the right people, working to refine how we do business and
harnessing the power of the latest technology have prepared us well for the challenges we face in this new economy.
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Leadership TeamHoward R. LevineChairman of the Board and Chief Executive Officer
R. James KellyPresident and Chief Operating Officer
Dorlisa K. FlurExecutive Vice President – Strategy and Marketing
Robert A. GeorgeExecutive Vice President – Chief Merchandising Officer
Charles S. Gibson, Jr.Executive Vice President – Supply Chain
Barry W. SullivanExecutive Vice President – Store Operations
Bryan P. CauseySenior Vice President – Planning, Allocation and Replenishment
Keith GehlSenior Vice President – Real Estate and Facilities
Joshua R. JewettSenior Vice President – Information Technology and Procurement, CIO
Janet G. Kelley Senior Vice President – General Counsel and Secretary
Michael S. KvitkoSenior Vice President – Merchandising
Wook LeeSenior Vice President – Global Sourcing
Thomas M. NashSenior Vice President – Real Estate Development
John J. ScanlonSenior Vice President – Merchandising
Kenneth T. SmithSenior Vice President – Chief Financial Officer
C. Martin SowersSenior Vice President – Finance
Bryan VenbergSenior Vice President – Human Resources
Elizabeth M. AustinVice President – Information Technology Operations and Infrastructure
Raina L. AvalonVice President – Transportation
Samuel J. BernsteinVice President – General Merchandise Manager
Earl C. BonnecazeVice President – Store Operations
James R. BowenVice President – Distribution
Timothy R. BrokawVice President – Decision Support
Mark S. ChidesterVice President – Human Resources, Store Operations
Charles D. CurryVice President – Store Planning and Store Development
Allen W. FieldsVice President – Store Operations
Marianne P. FiorucciVice President – Planning and Allocations
Joseph A. Hayes, IIIAssistant General Counsel, Corporate and Compliance
James H. HaysVice President – Internal Audit
Dennis A. HeskettVice President – Store Operations
Billy W. Jones, Jr.Vice President – Distribution
Michael E. LaurentiVice President – Information Technology
Timothy A. MatzVice President – General Merchandise Manager
Lonnie W. McCaffetyVice President – Store Operations
Colin P. McGinnisVice President – Store Operations Support
Dennis C. MerriamVice President – Human Resources, Distribution
Jacob J. ModlaVice President – Deputy General Counsel
Marilyn M. MorseVice President – Facilities Management
Mtu W. Pugh Vice President – Business Development
Kiley F. RawlinsVice President – Investor Relations and Corporate Communications
Richard P. SiliakusVice President – General Merchandise Manager
Donald G. SmithVice President – Marketing
R. Jeffrey ThomasVice President – Replenishment
Jerome G. VickersVice President – Store Operations
Boris ZelmanovichVice President – General Merchandise Manager, Food and Merchandise Innovation
Scott T. ZuckerVice President – Merchandise Operations
Michael J. ZuegeVice President – Loss Prevention
PeopleHire, train and develop a highly talented team, building a solid foundation of talent with an eye on the future.
TechnologyOur Store of the Future technology initiative is designed to offer the customer greater convenience. We’re expanding our payment types to help our shoppers move through the checkout process more quickly.
ProcessProject Accelerate helps us make decisions around our processes for category management, assortment planning, merchandise financial planning and space planning.
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’04 ’05 ’06 ’07 ’08
Net Sales(millions of dollars)
’04 ’05 ’06 ’07 ’08 ’04 ’05 ’06 ’07 ’08 ’04 ’05 ’06 ’07 ’08 ’04 ’05 ’06 ’07 ’08
Net Income(millions of dollars)
Returnon Average
Shareholders’Equity(percent)
Comparable StoreSales Gains
(percent)
Net IncomePer Diluted
Common Share
3,32
4
3,68
9
4,14
1
4,61
6
5,02
7
5,46
6
5,89
8
6,17
3
6,43
0
6,57
1
5,28
2
5,82
5
6,39
5
6,83
4
6,98
4
19.6
15.7
14.8
20.4
19.2
258
218
195
243
233
1.9
2.3
3.7
0.9
1.2
1.50
1.30
1.26
1.62
1.66
MaquoketaDistribution
Center
MoreheadDistribution
Center
RomeDistribution
Center
OdessaDistribution
Center
DuncanDistribution
Center
West MemphisDistribution
Center
MariannaDistribution
Center
Front RoyalDistribution
Center
MatthewsCorporate Officesand Distribution
Center
Number of Stores(as of fiscal year end)
Distribution Service Areas
Stores and Distribution Centers(as of fiscal year end)
Rome, New York907,000 Sq. Ft. / Opened ’06
Marianna, Florida907,000 Sq. Ft. / Opened ’05
Odessa, Texas907,000 Sq. Ft. / Opened ’03
Maquoketa, Iowa907,000 Sq. Ft. / Opened ’02
Morehead, Kentucky907,000 Sq. Ft. / Opened ’00
Duncan, Oklahoma907,000 Sq. Ft. / Opened ’99
Front Royal, Virginia907,000 Sq. Ft. / Opened ’98
West Memphis, Arkansas850,000 Sq. Ft. / Opened ’94
Matthews, North Carolina890,000 Sq. Ft. / Opened ’74 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08
24
31
60
130
20
104
90
11
71
32
140
238
411
303
198
364
214
264
46
290
204
186
348
96
98
229
22
31
35
128
817
195
9221
80
5120
99
22
115
12
363
118 145
3
Years Ended (In thousands, except per share amounts) August 30, 2008 September 1, 2007 August 26, 2006
Net sales $ 6,983,628 $ 6,834,305 $ 6,394,772
Cost of sales 4,637,826 4,512,242 4,276,466
Gross margin 2,345,802 2,322,063 2,118,306
Selling, general and administrative expenses 1,980,496 1,933,430 1,756,001
Litigation charge — — 45,000
Operating profit 365,306 388,633 317,305
Interest, net 3,544 6,737 6,161
Income before income taxes 361,762 381,896 311,144
Income taxes 128,689 139,042 116,033
Net income $ 233,073 $ 242,854 $ 195,111
Net income per common share – basic $ 1.66 $ 1.63 $ 1.26
Net income per common share – diluted $ 1.66 $ 1.62 $ 1.26
Dividends declared $ 68,537 $ 66,361 $ 62,757
Dividends declared per common share $ 0.49 $ 0.45 $ 0.41
Cash and investment securities $ 158,502 $ 284,671 $ 216,232
Total assets $ 2,661,782 $ 2,624,156 $ 2,523,029
Working capital $ 275,106 $ 406,977 $ 432,737
Long-term debt $ 250,000 $ 250,000 $ 250,000
Shareholders’ equity $ 1,254,083 $ 1,174,641 $ 1,208,393
Comparable store sales gain 1.2% 0.9% 3.7%
Stores opened 205 300 350
Stores closed 64 43 75
Number of stores – end of year 6,571 6,430 6,173
Family Dollar Financial Highlights
12
’04 ’05 ’06 ’07 ’08
Net Sales(millions of dollars)
’04 ’05 ’06 ’07 ’08 ’04 ’05 ’06 ’07 ’08 ’04 ’05 ’06 ’07 ’08 ’04 ’05 ’06 ’07 ’08
Net Income(millions of dollars)
Returnon Average
Shareholders’Equity(percent)
Comparable StoreSales Gains
(percent)
Net IncomePer Diluted
Common Share
3,32
4
3,68
9
4,14
1
4,61
6
5,02
7
5,46
6
5,89
8
6,17
3
6,43
0
6,57
1
5,28
2
5,82
5
6,39
5
6,83
4
6,98
4
19.6
15.7
14.8
20.4
19.2
258
218
195
243
233
1.9
2.3
3.7
0.9
1.2
1.50
1.30
1.26
1.62
1.66
MaquoketaDistribution
Center
MoreheadDistribution
Center
RomeDistribution
Center
OdessaDistribution
Center
DuncanDistribution
Center
West MemphisDistribution
Center
MariannaDistribution
Center
Front RoyalDistribution
Center
MatthewsCorporate Officesand Distribution
Center
Number of Stores(as of fiscal year end)
Distribution Service Areas
Stores and Distribution Centers(as of fiscal year end)
Rome, New York907,000 Sq. Ft. / Opened ’06
Marianna, Florida907,000 Sq. Ft. / Opened ’05
Odessa, Texas907,000 Sq. Ft. / Opened ’03
Maquoketa, Iowa907,000 Sq. Ft. / Opened ’02
Morehead, Kentucky907,000 Sq. Ft. / Opened ’00
Duncan, Oklahoma907,000 Sq. Ft. / Opened ’99
Front Royal, Virginia907,000 Sq. Ft. / Opened ’98
West Memphis, Arkansas850,000 Sq. Ft. / Opened ’94
Matthews, North Carolina890,000 Sq. Ft. / Opened ’74 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07 ’08
24
31
60
130
20
104
90
11
71
32
140
238
411
303
198
364
214
264
46
290
204
186
348
96
98
229
22
31
35
128
817
195
9221
80
5120
99
22
115
12
363
118 145
3
Post Office Box 1017 / Charlotte, North Carolina 28201-1017 / www.familydollar.com