Q1 2014 Family Dollar Stores Earnings Conference Call Presentation

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Q1 2014 Family Dollar Stores Earnings Conference Call Presentation

  1. 1. 1Q14 Earnings Conference Call January 9, 2014
  2. 2. A Word of Caution Certain statements contained in this presentation which are not historical facts are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements address the Company’s plans, activities or events which the Company expects will or may occur in the future. A number of important factors could cause actual results to differ materially from those expressed in any forward-looking statements. Such factors, risks and uncertainties are set forth under the headings “Cautionary Statement Regarding Forward-Looking Statements,” or “Risk Factors” or "Management’s Discussion and Analysis of Financial Condition and Results of Operation" in the Company’s annual report on Form 10-K and quarterly reports on Form 10-Q filed or to be filed, respectively, and which are expressly incorporated herein by reference. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of January 9, 2014. The Company does not undertake to update or revise its forwardlooking statements even if experience or future changes make it clear that projected results expressed or implied in such statements will not be realized, except as may be required by law. 2
  3. 3. Agenda Introduction & Safe Harbor Kiley Rawlins, CFA Opening Remarks Howard Levine Financial Review and Outlook Mary Winston Closing Remarks Howard Levine Questions & Answers Howard Levine Mary Winston VP – IR & Communications Chairman & CEO Chief Financial Officer 3
  4. 4. Opening Remarks Howard Levine Chairman & CEO
  5. 5. Key Investments • • • • Acceleration of new store openings Chain-wide renovation program Expansion of consumables categories Margin-driving initiatives – Global sourcing – Private brands 5
  6. 6. Moving Forward Accomplishments – Expanded market share – Customer satisfaction scores – Reduced store manager turnover Priorities – Stabilizing key businesses – Re-energizing our focus on value – Re-accelerating traffic 6
  7. 7. Pressures Facing our Customers • Elevated unemployment levels • Higher taxes • Reductions to key government assistance programs – SNAP benefits – Unemployment benefits • Healthcare uncertainties 7
  8. 8. Long Track Record of Success • Focus on providing customers with great values • Ability and willingness to adapt to near-term challenges while investing in the future 8
  9. 9. FY14 Objectives • • • • Refine and enhance assortment Strengthen value proposition Re-accelerate traffic Reduce infrastructure costs 9
  10. 10. Digesting Significant Changes • 1,000 new Food and HBA SKUs • Tobacco • Significant fixture and layout changes • • • • • • More trips Greater share of wallet Margin pressure Store manager turnover Shrink Inventory productivity 10
  11. 11. Moving Forward • Refine and enhance assortment – Food – Household • Investments to strengthen value proposition • Re-accelerate traffic – Emphasize EDLP – Optimize marketing tools • Reduce costs 11
  12. 12. Investments to Support Growth • Pallet delivery program • Renovations • New stores 12
  13. 13. Management Changes • Jason Reiser promoted to Chief Merchandising Officer – Joined Family Dollar in July 2013 as SVP, Merchandising – Promoted in October 2013 to Lead Merchandising Officer • President & COO Michael Bloom leaving Family Dollar 13
  14. 14. Financial Review and Outlook Mary Winston CFO
  15. 15. 1Q14 Highlights • Results in-line with previously provided guidance • Total net sales increase 3.2% • Comparable store sales decrease 2.8% – Cycling strong consumables sales growth – Customers face continued financial challenges – Intense promotional environment • Earnings per diluted share of $0.68 – Gross margin expansion 15
  16. 16. First Quarter Revenues Net Sales (billions) Comparable Store Sales Growth $2.5 6.6% $2.4 -2.8% 1Q13 1Q14 1Q13 1Q14 16
  17. 17. First Quarter Gross Profit Gross Margin Trends Improvements $900 • Higher initial markups • Lower freight costs $800 (Gross Profit ($M) $700 $600 36.1% 36.0% Headwinds 35.3% $500 34.1% 34.3% $400 $300 $200 $100 • Mix pressure • Higher inventory shrinkage • Higher markdowns $0 1Q10 1Q11 1Q12 GM$ 1Q13 1Q14 GM Rate 17
  18. 18. Sales Mix Trends Category Sales Mix Category Sales Mix (% of Sales) (% of Sales) 9.1% 7.8% 9.0% 72.5% +170 bps 4Q12 74.2% 73.9% 8.6% 6.9% 9.6% 8.8% 7.4% 10.0% 4Q13 9.4% 8.6% 9.5% 1Q13 +100 bps 74.9% 1Q14 Consumables Home Products Consumables Home Products Apparel & Accessories Seasonal & Electronics Apparel & Accessories Seasonal & Electronics 18
  19. 19. First Quarter SG&A Expense SG&A Trends Leverage $800 $700 30.1% 29.9% SG&A Expense ($M) $600 $500 29.5% 29.2% $400 $300 28.9% • Advertising • Insurance • Incentive compensation De-leverage $200 • Store occupancy • Store labor $100 $0 1Q10 SG&A 1Q11 1Q12 1Q13 1Q14 SG&A (% of Sales) 19
  20. 20. First Quarter Earnings Results (in millions except for per share amounts) 1Q13 1Q14 Change Net Income $80.3 $78.0 -2.8% Diluted Earnings per Share $0.69 $0.68 -1.4% Weighted average shares - diluted 116.2 115.1 20
  21. 21. $250 $225 $210 $200 (thousands) $175 $205 $183 $154 $166 $150 • Anniversary of FY12 consumables expansion • Well-managed discretionary inventories $125 $100 $75 $50 $25 $0 1Q10 1Q11 1Q12 1Q13 1Q14 21
  22. 22. Capital Expenditures $225 $196 $200 $175 (millions) $150 $131 $125 $113 $100 • New store openings ($43M) • Renovation program ($31M) • Corporate/ IT ($20M) • Existing stores ($14M) $75 $50 $39 $39 1Q10 1Q11 $25 $0 1Q12 1Q13 1Q14 22
  23. 23. Returning Capital to Shareholders $300 (millions) $200 258 $100 $0 125 25 19 1Q10 20 1Q11 Dividends 27 21 25 24 1Q12 1Q13 Share Repurchases 30 1Q14 23
  24. 24. Outlook* 2Q14 Total Sales^ Low-single-digit growth Comparable Store Sales Low-single-digit decline Gross Margin Expansion SG&A Expense De-leverage Diluted Earnings per Share $0.85 - $0.95 *As provided in earnings press release dated January 9, 2014 ^Excluding impact of the extra week in 2Q13 24
  25. 25. Outlook* FY14 Total Sales^ Comparable Store Sales Low-to-mid-single-digit growth Low-single-digit decline Gross Margin Flat SG&A Expense De-leverage Tax Rate 36% - 36.5% Diluted Earnings per Share $3.25 – $3.55 Capital expenditures $450M - $500M Sale-leaseback transactions $200M - $250M Share repurchases ~$250M *As provided in earnings press release dated January 9, 2014 ^Excluding impact of the extra week in FY13 25
  26. 26. 1Q14 Earnings Conference Call January 9, 2014

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