Family Dollar Stores Earnings Call Insights: Sales Outlook for Spring and Earnings Perspective

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Family Dollar Stores (NYSE:FDO) recently reported its second quarter earnings and discussed the following topics in its earnings conference call.

Sales Outlook for Spring

John Heinbockel – Guggenheim: So two things. March comps up 2%, do you guys not think – I know you say 2% to 4% is the range, but more like the lower end. Do you not think that sales will get better as the weather gets warmer and we do more spring business in April and May?

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Howard R. Levine – Chairman and CEO: Sure John, good morning. That’s a question that we’ve discussed a lot frankly. One of the thoughts that we had was, in considering this is just how unpredictable and how uncertain things are. So just as an example, when I take a look back over the last several months, we came through the first quarter with 6.6% comp, finished with a strong November, had a great Thanksgiving sell-through, great Thanksgiving holiday. December was soft, whether that was to the fiscal cliff conversations or something else, we’re uncertain. We moved into January, we had high single-digit comps the first three weeks then the tax refund delay issue began to impact us for the next three weeks and February finished on a strong note. Now we are up against probably the best weather that we had the entire spring and summer selling season from last year and sales came in a little softer than we had anticipated. I’m (in the camp) with you, I do believe that if the season warms up and consumers are more in the mood to buy apparel that there is an opportunity to do that. We just thought it made some sense to be a little more cautious and take some of the risk out and I think it’s important to understand that and a great example of this is the March this year to last year. Our core customer buys when they need it. When it’s cold and wet they have no need for spring and summer selling merchandise. Conversely last year when we had probably the best weather we’ve had in many, many seasons, we had some great apparel sales. So it’s just a lot of uncertainty out there and you all also saw the jobs report last week that that gave another leg of uncertainty out there, what’s going to happen with that and all the other governmental discussions are going on out there from job growth to subsidies and entitlements, et cetera. So we just thought it made sense to reset, get a little more cautious and really look to try to do better than that what we have given in guidance and take a little longer term view in our approach.

John Heinbockel – Guggenheim: Then for Mike, you talked about repositioning home and apparel within the layout. Can you maybe walk through that a little bit more, where those areas are going in the layout? Are you also changing the composition of what you’re selling i.e., price points, fashion content, more (big specs) or no?

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Michael K. Bloom – President and COO: Sure, John. As far as the layout goes, simply stated, we are moving apparel back to the front of the store and it’s going to go right in front of consumables. HBA will remain in the front of the store, apparel will be in the front of the store and then food will come right behind apparel. It’s a little tweak. So, that’s basically the layout changes. As far as the mix goes, John, we continue to work on the mix. We continue to tweak. As Howard mentioned, our customer buys on need and basic apparel is showing some stability, but we’ve learned a lot over the last year or so. We’ll continue to tweak whether it’s – you’re right, whether it’s colors or fashion or whether it’s more leggings or more camisoles, or whether it’s colors, yes, we continue do that. That’s what we do. So, yes, we have got a fairly new team down there. We mentioned that I think on the last call and are proud of the work they’ve done. I can tell you. I think we mentioned this in the last call as well. Howard and I have been intimately involved in this and real proud of sort of where they are going, the decisions they are making, the mix, the supplier relationships, so again, just looking for stability in that business…

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