Matthews, North Carolina based discount retailer Family Dollar Stores held its F1Q11 Earnings Call yesterday – January 05, 2011 as part of the call Chairman and CEO Howard Levine detailed the fast growing retailers growth and improvements to its Private Brand portfolio. The Private Brand commentary topped out at close to 500 words close to 15% of the main call. This is an impressive statement of commitment to the investment community that Private Brands are a significant strategic pillar. BRAVO!
In addition to our renovation program, we are investing to improve our in-stock position, expand our consumable assortments to include more national brands, and improve our value proposition. We are also expanding our marketing efforts and accelerating our private brand programs.
Several months ago, we began to focus on opportunities to drive greater sales through the improvement of our in-stock position in key areas. As evidenced by our inventory growth in the first quarter, we have invested in a number of initiatives to improve in-stocks. These investments are already having an impact on our sales and customer satisfaction survey results, and we continue to test opportunities to drive additional sales growth through in-stock improvement.
In recent quarters, expansion of our consumable sales was primarily realized through the addition of national brands. The expansion of national brands is a relatively quick way to increase our assortment in key driving areas and improve overall quality perception, but the growth of national brands doesn’t generally contribute to gross margin expansion. Consequently, we are working aggressively to better balance sales of national brands and sales of private brands.
Our initial focus has resulted in the introduction of a few new Family Dollar brands as well as the conversion of vendor control labels. As a result, we have more control over quality standards and a greater opportunity to leverage brand value more effectively.
During the first quarter, we continued to expand our penetration of private brands. For example, today our Kidgets assortment accounts for half of our diaper sales, and this fall we introduced even more Kidgets baby care items for our customers.
We also continue to expand our assortment of Family Gourmet products. If you get a chance, try our new Family Gourmet breakfast items such as our pancake mix and syrup or our assortment of Family Gourmet coffee and creamers. I think you’ll be more than satisfied by the quality and very pleased with the price.
While we have made significant progress in expanding our penetration of private brands, we want to move faster. As a result, I’m pleased to announce that we recently established a strategic partnership with a leading sales and marketing company dedicated to the private brand space. Leveraging their extensive experience and resources, we intend to accelerate our efforts to expand our penetration of private brands.
The expansion of our assortment of private brands should lead to gross margin expansion over time. In addition, our investments to build an integrated global supply chain will support our private brand goals while also enabling us to reduce our merchandising costs.
Last year, less than 10% of our purchases were imported directly by us. We believe that we can reduce cost and improve quality with a better balance between direct relationships, agents, and U.S.-based trading companies. This year we have taken a significant step toward this goal with the opening of an office in Hong Kong.
SOURCE: Seeking Alpha