Operator
Next, we’ll move onto Stephen Grambling with Goldman Sachs.
Stephen Grambling, Goldman Sachs
Hi. Good morning.
Howard Levine, Chairman and CEO, Family Dollar Stores Inc
Good morning.
Mary Winston, Chief Financial Officer, Family Dollar Stores Inc
Good morning.
Stephen Grambling, Goldman Sachs
As a followup to the earlier price investment questions, have you seen any response from a competitive standpoint? Also do you feel like you are where you need to be in terms of price on other categories such as household, HBA, etc etc?
Howard Levine, Chairman and CEO, Family Dollar Stores Inc
Yeah. We feel pretty good about where we are. As you know, it is an iterative process, so we are continuing to understand what is going on in the market, but we feel pretty good about where we are right now.
In terms of the competitive response, if you recall when we made these adjustments, we did not undercut competition. We were more or less meeting competition in most cases. So we have not really seen a significant effort there, but there has been some and we continue to monitor that to ensure that we remain with our overall competitiveness. We feel pretty good about where we are and we are continuing to manage through it.
Stephen Grambling, Goldman Sachs
Just to confirm, there has not been a competitive response per se?
Howard Levine, Chairman and CEO, Family Dollar Stores Inc
Not one that is measurable that we could see. There is always price movements out there, up and down from all of our competitors, but that does not seem to be anything significant that we have seen out there to-date.
Stephen Grambling, Goldman Sachs
Okay. Thanks so much.
Howard Levine, Chairman and CEO, Family Dollar Stores Inc
Sure.
Operator
Our next question comes from Paul Trussell with Deutsche Bank.
Paul Trussell, Deutsche Bank
Good morning. I am just putting together a number of factors that are impacting margins including the reduced promotions and markdowns but also the mixed shifts. Mary, could you just help us think about the second quarter and the balance of ‘15 from a merchandise margin standpoint. I know you are not giving full P&L guidance, but is there an expectation for still meaningful margin contraction overall? Or should we maybe be moving towards a scenario where gross margins can actually expand since we were cycling the time last year where you made these initial pricing cuts?
Mary Winston, Chief Financial Officer, Family Dollar Stores Inc
Thanks for the question, Paul. You started or you commented on where are we going to start, which is, as you know, we are not giving specific guidance, so I would not do that. But what I will do is just tell you the trends we are seeing in the business and what we expect those trends to look like going throughout the rest of the year. As you saw in the first quarter, our margin was greatly impacted by a shift in the mix. We had about a 70 basis point shift just between consumables and discretionary. Then on top of that, within consumables, we had a significant shift in the mix to lower margin consumable item. That is a trend that we saw beginning in last year in the fourth quarter and we talked about that as having impacted our fourth quarter. We indicated that it was going to continue into this first quarter and present a challenge. That is exactly what we saw.
As I am looking at the second quarter, I am expecting those trends to continue. Remember, those are the categories that we focused on. We did resets in the food area. We have expanded our assortment in food. We expanded our assortment in tobacco. The positive side of that is those things have been successful. The downside of that is those are very low margin items.
As we go into the second quarter, we expect to continue to see pressure in those areas. I do not expect it to be quite as great as what we have seen. We do expect improving trends as we go through the year due to a number of the things that we are doing to focus on delivering profitable sales.
