Family Dollar Eyes Inner Cities

By Jennifer D. Duell
Globe Street Retail
October 12, 2005

NEW YORK CITY - With hopes of solidifying a growth vehicle, Family Dollar Stores Inc. is making significant investments in its urban stores through a new program dubbed the "Urban Initiative."

"The urban initiative is our greatest opportunity but it also has the greatest challenges," said Family Dollar chairman and CFO Jim Kelley during a presentation here at Bear Stearns investor conference. Realizing that urban markets are under-penetrated by dollar stores and have the potential of being highly profitable, Family Dollar embarked upon the Urban Initiative earlier in late 2004, after throwing around the idea for the past seven or eight years.

In order to meet these staffing needs, Family Dollar is investing in technology for its urban units, Kelley said. Over the past 12 months, the discount chain has increased its core operating expenses to implement new human resources technology that makes it easier to screen employment applications. The program, which was three years in the making, has generated a lot of applications for the chain.

While urban stores possess "legitimate" barriers, Kelley says, they're worth it. "The retailer that's able to develop the processes needed to operate successfully in that environment will have a significant competitive advantage," he stressed. He continued: "If we're successful (in our urban initiative) – and we believe we will be, it augments our expansion capabilities."

Currently, Family Dollar has 1,300 stores in urban areas, but the chain is not looking to expand its urban footprint much during 2006, Kelley says. "We're going to hold… and refine the process and let the tech rollout catch up," he explained.