Family Dollar Hurts Along with Its Shoppers
By George Anderson
Howard Levine, chairman and CEO of Family Dollar Stores, will be the first to tell you that the company’s success is the result of its focus on low-income and value-conscious consumers.
But even as government statistics point out that there are a growing number of consumers living at or below poverty level, the realities of high-energy prices have left those with little even less to spend at stores such as Mr. Levine’s.
Nick McCoy, a senior consultant at Retail Forward, told The Associated Press that Family Dollar is not alone. “All of these chains have had more difficulty achieving same-store sales,” he said. “The economy had a lot to do with it and their core customer was hit hard by higher fuel costs, so they delay nonessential shopping trips.”
The resulting slowdown in sales, combined with higher than expected costs to upgrade stores, has caused Family Dollar to cut back its urban initiative.
Back in 2002, the chain made the decision to focus on urban markets with populations of 200,000 or more. The idea was to build new stores in underserved communities and remodel existing units in those communities.
Unfortunately for Family Dollar, “The program turned out to be more expensive than they anticipated when they first rolled it out,” said Mr. McCoy.
The result has been that Family Dollar has decided to slowdown the initiative.
Anthony Chukumba, an analyst with Morningstar, said Family Dollar had the right idea but simply didn’t execute. He cited problems with meeting zoning requirements and underestimating losses it would sustain due to shrink once stores opened.
“I think Family Dollar still has good concept, offering lower to middle-income consumers compelling values in convenient locations,” he said. “Their business model is definitely not irreparably broken, but they need to take steps to repair some of the mistakes they have made.”
Moderator’s Comment: What is your assessment of the top dollar store chains? Where do you see opportunities for these businesses to grow?
George Anderson – Moderator
- FAMILY DOLLAR: Discount chain works to make its ‘urban
initiative’ a success – The Associated Press/The Times and Democrat