Family Dollar Stores Inc (FDO) First Quarter 2015 Earnings Call Transcript

Howard Levine, Chairman and CEO, Family Dollar Stores Inc
Go ahead, Mary.

Mary Winston, Chief Financial Officer, Family Dollar Stores Inc
I do think it is the opening price point associated with the EDLP investments we are making in, just the focus overall of having more lower opening price points that are going to resonate with our customer in this challenging environment.

Howard Levine, Chairman and CEO, Family Dollar Stores Inc
Yeah. And Anthony, just to expand a little bit on that. One of the efforts, in addition to lowering the retails on the 1000 basic SKUs, which on the seasonal and fashion side, one of the things that we did, have been working on really starting with this past back-to-school season was just getting more of those key price points out there like $1, $2, $3 in our assortment.

What we are seeing is a great velocity in unit sales. We need to see more of it to get it up — to get catch up there, but that is primarily what we believe impacted the basket size. We think as we continue to mature with that and get those season events out there that will continue to get more traction there, but that is the primary issue there with the basket size.

Anthony Chukumba, BB&T Capital Markets
Got it. That is helpful. Thank you.

Operator
We will take our next question from Charles Grom with Sterne Agee.

Charles Grom, Sterne Agee
Hey, good morning, Howard, Mary, and Kiley. You have been at Family Dollar your whole life and following your father. When you look back at what has happened here over the past couple of months with the declining gas prices. Just wondering if you can reflect back at any time in your history with the company that you have seen such a decline. I guess how long does it typically take the consumer to react and when the consumer does react, does it get reflected more first in traffic or ticket? Just wondering if you can give us some perspectives given your history at the company?

Howard Levine, Chairman and CEO, Family Dollar Stores Inc
Sure, Chuck. We were talking about that yesterday that throughout the course of time here, conversations with the Street in terms of when gas goes up, when gas goes down, what is the impact. What I think is consistent throughout time is that it is a plus for the consumer. It is clearly a benefit. Unlike other years, there is always other issues that are going on as well whether it is the competition, whether its employment or whether it is weather that also impacts when the consumer or when we actually see it impact our business.

There is not a lot of consistency there, but just from a big picture standpoint, I do believe that is a big benefit for us. We would like to see it come in. I also have to mention that there are some negatives out there. Unemployment rates, as I talked about for our core customer, are much higher than the national averages and the participation rate is much lower. It still have a lot of uncertainty. We can see how they shop our stores and very focused on value. I can assure they are getting a good deal. It makes it a little tough on us given those challenges. But I think we are attempting to reposition the business for that kind of environment and anything that helps us like gas prices or something on the employment side is a real plus.

Charles Grom, Sterne Agee
Okay, great. That was helpful. Then just a second question is just where do you think you guys are on the guide path to getting back to EDLP. I guess, can you reflect back on the changes you made in the mid-90’s and I guess do you feel that you may need to spend more than the initial $50 million investment? Then as a followup to all of that, when you talked about the units being ultimate single digits, where was that relative to what you thought you would get, when you decided to make the investments last April? Thank you.