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

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Operator
Yes. Our next question comes from Matt Nemer with Wells Fargo Securities.

Matt Nemer, Wells Fargo Securities
Good morning, everyone. Just a quick question on the comp performance in the quarter. I am wondering if you can provide a little color on the rural stores versus your urban stores if there are any significant differences in the comp performance.

Howard Levine, Chairman and CEO, Family Dollar Stores Inc
Sure. I think given the focus of our renovation program, primarily on rural markets and in more suburban markets, those stores have performed better than some of the urban stores. As we begin to renovate and address some of the urban stores with our renovation program, we would expect that to pick up a little bit more. That’s kind of where we are.

Matt Nemer, Wells Fargo Securities
I guess this is as a follow-up.

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

Matt Nemer, Wells Fargo Securities
As a follow-up to that, are you seeing anything in terms of demographics or geography that would confirm some benefit from lower gas prices?

Howard Levine, Chairman and CEO, Family Dollar Stores Inc
It’s hard to see it yet, Matt, candidly. I think it’s coming, as I talked about. I think it’s very much positive for our customer. It’s just hard to see it and certainly haven’t seen it specifically in any market types at this point.

Matt Nemer, Wells Fargo Securities
Okay. Then just lastly, is there any way to parse out the impact of fewer promo events and fewer circulars on the comp in the quarter? I am assuming that is pretty hard to do, but I just want to get some color on that.

Howard Levine, Chairman and CEO, Family Dollar Stores Inc
Yeah. I mean, the way we thought about this and how we addressed what events we eliminated was strictly on an ROI basis. While there could have been some contribution to the top line by the promotional events, when we look at the end results and the return of the investment, it was not as positive as we wanted, so those were the ones that we eliminated.

It’s just as we work through this transition, it’s very hard to see. Often look back to when we went through this in the middle 90s, a different era and a different situation. It was pretty painful.On top of the $50 million price investments, also look to start eliminating circulars. It’s almost like a double hit. I am encouraged by the fact that we have gotten most of that behind us now. The heavy lifting there in terms of the circular events is mostly behind us.

As I said, we are still going to have a promotional strategy and I have talked about approximately two per month. Our pricing perception continues to improve. We are really seeing some nice unit velocity as a result of some of those price investments. It is painful, honestly, as we are going through this. We are hoping to see some light at the end of the tunnel and we are encouraged by what we saw in December.

Matt Nemer, Wells Fargo Securities
Very helpful. Thanks so much.

Operator
Our next question comes from Michael Lasser with UBS Investment Bank.

Michael Lasser, UBS Investment Bank
Good morning. Thanks a lot for taking my question. I was curious by your comment about the attachment rate associated with the mid single-digit increase in the consumable area. Is there something that you think is driving the lack of attachment? Are you drawing in a different customer? Have you lost the customer that historically would have a higher propensity to attach? What do you think is driving that?

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