Family Dollar adds beer and wine

Family Dollar (NYSE:FDO) announced it would start stocking shelves with beer and wine. The deep-discounter already garners a majority of sales from grocery items and the chain hopes to increase the average ticket.

Family Dollar experimented with selling alcohol in about 200 stores this summer, reported Bloomberg. The results were strong enough to take the expansion nationwide.

The announcement came during a quarterly shareholders meeting in which the company reported weak quarterly earnings.

Although food, beer and wine tend to be low margin items, they also bring shoppers back into the store more frequently, a way in which Family Dollar hopes to battle trip consolidation. Profit margins have been steadily sliding for three years and the company is undergoing a transition to change that.

"Our observations are that it's still pretty tough out there," CEO Howard Levine told analysts. "The low-end consumer has not benefited from this recovery at all, and I think has even slipped back."

Third quarter same store sales fell 1.8 percent because of fewer customer transactions, slightly offset by an increase in the average customer transaction value. However, net sales increased 3.3 percent to $2.66 billion from $2.57 billion in the quarter the prior year, stated Mary Winston, CFO, Family Dollar.

Levine said the company would move forward with restructuring initiatives, which include a $50 million investment to permanently lower prices on more than1,000 items. Also, the company would enhance key traffic-driving categories including refrigerated and frozen food, and now beer and wine. In addition, the company remains on track to close 370 underperforming stores by the end of the fiscal year.

Earlier this summer, Family Dollar adopted the poison pill following the revelation that activist investor Carl Icahn became its largest shareholder. Icahn has been pushing the retailer to sell.

The outlook for the fourth quarter was flat sales for comparable stores. However, the retailer predicts low-single-digit growth for total sales in 2014. 

For more:
-See this Bloomberg article
-See this Family Dollar presentation

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