Howard Levine, Chairman and CEO, Family Dollar Stores Inc.
Thank you, Kiley, and good morning everyone. This morning, we reported results for the first quarter of fiscal 2015. Earnings per diluted share for the quarter on a GAAP basis was $0.36, excluding fees related to the pending merger with Dollar Tree, earnings per diluted share was $0.44 in the first quarter this year, compared to $0.68 in the first quarter of last year.
As expected, the quarter was very challenging. Many of the headwinds we faced in the fourth quarter of fiscal ‘14 continued into the first quarter of fiscal ‘15. Our gross margin continued to be pressured by our EDLP investments and the strong growth of lower margin consumable categories. While our team did a good job of controlling expenses, ongoing topline challenges, and continued margin pressure impacted the quarter’s profitability.While our first quarter results were disappointing, there were some positive developments in the quarter worth highlighting. Our food business continues to drive traffic and increased as a percentage of total sales.
Last spring, we added approximately 400 new food items with the focus on key national brands to drive traffic and build customer loyalty. We also improved adjacencies within this category to make it easier to shop. These changes combined with key pricing investments are driving increased transactions and delivering strong comp growth within this category.
Tobacco also continued to be a strong driver of sales for us. Since adding tobacco to our assortment in 2012, our market share has grown to a little more than 4% of the overall market. This quarter, we expanded our assortment, adding new national brands and other tobacco products. Our customers responded well and we continue to see nice attachment rates to the tobacco transaction.
Finally, our seasonal businesses also did well during the quarter, building on a successful back-to-school season, our Halloween strategy focused on cross merchandising efforts to drive sales growth. This Halloween, we delivered more value to the customer with a greater assortment of national brands and a stronger focus on key opening price points. The result was an increase in transactions and market share growth in these areas.
Sales growth in food, tobacco, and other seasonal areas in the quarter was offset by weaker performance in other consumable categories, including household and health and beauty aids, as well as softer trends in apparel and home. Our merchandising teams are focused on stabilizing these categories and improving their performance.
Looking forward, we are encouraged by our results during the important holiday season. As a reminder, last year, in response to the competitive environment and challenging holiday sales trend, we leveraged significant in-store promotions to drive in-season sales and manage discretionary inventories. This year, our focus was on driving more profitability during this period.
Beginning last summer, our teams worked diligently to make sure that our seasonal receipts were delivered on time, despite severe congestions and productivity issues at ports on the West Coast.We also created stronger action plans to help our store teams transition from Halloween through Thanksgiving, and into the important gift giving season. To reinforce our value proposition, we leveraged more key opening price points and we reduced the number of promotional events.As a result of these efforts, we achieved record sales in the month of December and delivered a 1.2% increase in comparable store sales. Importantly, we drove increased traffic with fewer promotional markdowns.
As we reflect on the holiday season, we believe the customers continue to purchase later in the season and closer to need. This was evidenced by our sales on Christmas Eve, which saw the highest sales for single day in our company’s history.From a category perspective, our seasonal businesses in December was mixed. Gift and trim-a-tree saw positive sales growth. While in the toy category we continue to see more of a structural transition in the overall market to electronic toys and games.Importantly, we saw an improvement in the sales trend in many of our consumable categories, including health and beauty aids and household. And we saw the strongest growth in customer traffic in nearly two years.
