Key Family Dollar Metrics
Recently, we wrote about Dollar General and Dollar Tree’s improving business momentum. That was not the case at Family Dollar, which has the weakest 1- and 3-year trends as shown below. Those weaker sales are also leading to a material erosion in profitability. Family Dollar's TTM EBITDA rate fell to 5% from 6.9% last year and is well below Dollar General’s 11.3%. Reflecting those challenges, Family Dollar is making downward price adjustments to its assortment to improve its consumer proposition, as well as bringing in two new executives, John Flanigan as Chief Supply Chain Officer and Larry Gatta as CMO. Flanigan was most recently the lead Global Supply Chain at Dollar General and Gatta was the manager of the consumables business at Dollar General. Both worked with Chairman Rick Dreiling when he was CEO at Dollar General.
- Many of the new initiatives that we've recently discussed (productivity investments in supply chain and upgrades to business IT systems) also apply to Family Dollar. Additionally, the company is going to invest more in private brands, enhancing the mix (i.e., more consumables) and store standards (in-stocks and service-levels). Importantly, the leadership of Dollar Tree couldn’t put their focus on the Family Dollar banner until it had turned the Dollar Tree banner. This renewed focus to Family Dollar also speaks to their confidence in the momentum at Dollar Tree.
- 70 new units were added in the quarter, bringing the total to 8,074.
- Comparable-store sales declined -0.1% and TTM sales per square foot of $209 declined 3%Q/Q. This figure is well below Dollar General’s $253, which demonstrates the enormous opportunity that Family Dollar has to improve its productivity. Additionally, over time CEO Mike Witynski said that the company can return EBITDA margins to above 10% (from 5% today). Combined, that opportunity is worth $1B in EBITDA (relative to total company EBITDA of $2.5B in 2021).
