1. 1Q14 Earnings
Conference Call
January 9, 2014

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. 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. Opening Remarks
Howard Levine
Chairman & CEO

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. 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. Pressures Facing our Customers
• Elevated unemployment levels
• Higher taxes
• Reductions to key government assistance
programs
– SNAP benefits
– Unemployment benefits
• Healthcare uncertainties
7

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. FY14 Objectives
•
•
•
•
Refine and enhance assortment
Strengthen value proposition
Re-accelerate traffic
Reduce infrastructure costs
9

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. 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. Investments to Support Growth
• Pallet delivery program
• Renovations
• New stores
12

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. Financial Review and
Outlook
Mary Winston
CFO

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. First Quarter Revenues
Net Sales
(billions)
Comparable Store Sales Growth
$2.5
6.6%
$2.4
-2.8%
1Q13
1Q14
1Q13
1Q14
16

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. 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. 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. 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. $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. 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. 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. 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. 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
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26. 1Q14 Earnings
Conference Call
January 9, 2014