FDO Family Dollar Feb 2010 Presentation

Deutsche Bank Conference February 10, 2010
Ken Smith
Chief Financial Officer
February 10, 2010
1
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 heading “Cautionary
Statement Regarding Forward-Looking Statements“ or “Risk Factors” in
"Management’s Discussion and Analysis of Financial Condition and
Results of Operation" in the Company’s annual report on Form 10-K and
quarterly report 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 today, February 10, 2010. The
Company does not undertake to update or revise its forward-looking
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
Today’s Discussion
• Introduce Family Dollar Stores
• Drivers of shareholder value
• Future opportunity
3
Family Dollar Today

• $7.4 billion in revenues
• 7,500 – 9,000 selling
space
• Neighborhood stores
• Value and Convenience
• $9.84 average transaction
4
50 Years of Success
• First store opened in Charlotte in 1959
5
6,600+ Locations
New Hampshire - 22
Vermont - 12 50
12
70
Massachusetts – 102
31 23 137 292
20 349
Rhode Island - 22
32 272
26 31 Connecticut - 49
411
59 222 194 New Jersey - 78
106 117 Delaware - 21
213
35 95 188 Maryland - 92
370
207 Washington, DC - 3
134 128
101
93 203
143 313
118
841
229
389
6
Apparel and Home Close-Outs
7
Consumable and Discretionary Items
8
Drivers of Shareholder Value
Earnings
Growth
Shareholder
Productive Value
Invested
Capital
9
Earnings Growth
Sales Increase Gross

Growth Margin
Leverage
Expenses
10
Diverse Customer Base
11
The Customer Opportunity

Reaching Both Lower & Middle Income Customers
100% $70K+
90%
80% $40-$70K
Percent of Total Sales
70%
60%
50%
40%
<$40K
30%
20%
10%
0%
2006 2007 2008 2009
Source: Nielsen Homescan Panel – FDO Trade Area Only (52 weeks
ending June vs. prior 52 weeks)
®
12
New Sales Growth

52 Weeks Ended
$70K+
$40-$70K
<$40K
2008 2009
Source: Nielsen Homescan Panel – FDO Trade Area Only (52 weeks
ending June vs. prior 52 weeks)
®
13
Market Share Growth

Becoming a More Compelling Place to Shop
14
Broaden Appeal of Assortment

• Customer research
• Category management
• Consumables
– National brands
– Private label
• Discretionary categories
15
Enhanced In-store Experience

• Increased convenience
• Improved layouts and adjacencies
• Enhanced shopability
16
Improved Store Standards

• Workforce stabilization
• Inventory reductions
• Process improvement
17
Earnings Growth
Sales Increase
Growth
Gross Margin
Leverage
Expenses
18
Gross Margin Drivers
• Pricing
• Global sourcing
• Private label
19
Private Label Program

Private Label % sales
Current
Goal
19% • Created dedicated team
Total
Sales
~25% • Defined top-down
strategy
• Built business
UPC-
~10% processes
Coded
Sales ~20%
15-20% competitive
benchmark
Source: Nielsen POS, Homescan, and Store Brands data – 2008

®
20
Earnings Growth
Sales Increase Gross

Growth Margin
Leverage
Expenses
21
Leverage Expenses
Focus on gaining efficiencies in our core expenses…
Core Expenses
… in order to fund capability building and growth

initiatives while leveraging SG&A
Investments
22
Earnings
Growth
Shareholder
Productive Value
Invested
Capital
23
Return on Invested Capital

12.4%
11.5%
10.9%
10.7% 10.7%
9.7%
2004 2005 2006 2007* 2008 2009
ROIC defined as: (EBIT+Rent)*(1-Tax Rate) / (Equity+Debt+Rent*8)

*2006 impacted by litigation charge of $45 million
*2007 was a 53-week year
24
Working Capital
• Inventory management
• Project Accelerate
• Improved GMROI and turns
Gross Margin Return on Inventory
2.5
2.2 2.2
2.0
1.9
2005 2006 2007 2008 2009
25
Capital Expenditures
• Growth and capability building
initiatives
• New stores
• Renovations and relocations
• Distribution and transportation
• Corporate / infrastructure / technology
26
Well Positioned to Fund Capital Needs

• Free Cash Flow generation
• Solid Balance Sheet
• Liquidity position is strong
$374
$348
Free Cash Flow
$284
$259
$70
2005 2006 2007 2008 2009
Free Cash Flow = Cash from Operations less CapX and

dividends
®
27
Earnings
Growth
Shareholder
Productive Value
Invested
Capital
28
Ken Smith
Chief Financial Officer
February 10, 2010
29

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Deutsche Bank Conference February 10, 2010

• Introduce Family Dollar Stores

• Drivers of shareholder value

Family Dollar Today

Apparel and Home Close-Outs

Consumable and Discretionary Items

Drivers of Shareholder Value

Sales Increase Gross

Diverse Customer Base

The Customer Opportunity

New Sales Growth

Market Share Growth

Broaden Appeal of Assortment

Enhanced In-store Experience

Improved Store Standards

Gross Margin Drivers

Private Label Program

Source: Nielsen POS, Homescan, and Store Brands data – 2008

Sales Increase Gross

… in order to fund capability building and growth

Drivers of Shareholder Value

Return on Invested Capital

2004 2005 2006 2007* 2008 2009

ROIC defined as: (EBIT+Rent)*(1-Tax Rate) / (Equity+Debt+Rent*8)

2005 2006 2007 2008 2009

Well Positioned to Fund Capital Needs

2005 2006 2007 2008 2009

Free Cash Flow = Cash from Operations less CapX and

Drivers of Shareholder Value

You might also like

ROIC defined as: (EBIT+Rent)(1-Tax Rate) / (Equity+Debt+Rent8)