COMPETITIVE WATCH: Family Dollar Food Sales Squeeze Margins

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COMPETITIVE WATCH: Family Dollar Food Sales Squeeze Margins

MATTHEWS, N.C. -- Higher sales of lower-margin food at Family Dollar Stores Inc., headquartered here, will restrain the company's operating margins in fiscal 2007, but it will combat that pressure with a range of initiatives, The Associated Press reported.

The growth in lower-margin foodstuffs and low single-digit same store sales increases will be balanced by focusing on better purchase markups, lower inventory shrinkage and reduced freight costs, the report stated.

Family Dollar same-store sales in March will see growth of 3 to 5 percent, with sales growing 5 to 7 percent. Revenue is expected to be between $1.65 and $1.68 billion, the report stated.

In fiscal 2007, the company expects to open 300 stores while closing 45.

The trend of placing food in dollar stores can be attributed to Dollar General, which took the lead on installing freezers and refrigeration units in stores to include food in its merchandise, The Wall Street Journal reported.

However, the company's same-store sales faltered last year, and it saw an increase in store manager turnover, inventory costs and shrinkage, the report stated. A plan of action was launched in November which would close 400 stores and reduce inventory costs be eliminating its "packaway" inventory practice and instead, liquidating the merchandise at marked-down prices, the Journal reported.