Family Dollar To Clean Up Its Act

Jan 31, 2005

By George Anderson

For those ancient enough to remember the old five and dime stores (Mickey Finn’s from our youth) before they suddenly seemed to vanish from the retailing landscape, they likely recall often dirty; unopened boxes and fallen merchandise cluttering the aisles, racks and shelves filled with things you didn’t need or want and the people working in the stores always seeming to be dealing with some combination of personality and personal hygiene issues.

Today’s version of the five and dime, the dollar store, generally gets higher marks than its predecessor but according to A.G. Edwards’ analyst, Robert Buchanan, some of the old problems appear to be creeping up again.

According to a report in the Charlotte Business Journal, Mr. Buchanan took the Family Dollar Stores chain to task for stores that “look bad and are getting worse.”

During a tour of stores, Mr. Buchanan found them to be dirty, cluttered and often out-of-stock on key items. The root of Family Dollar’s problems was poor execution by store-level employees.

Family Dollar’s executive vice president George Mahoney doesn’t fully agree with Mr. Buchanan’s assessment, even though the company has earmarked $20 million to renovate existing stores. “We have more than 5,500 stores in operation. Can you find a number of those that are not in the condition that we would like them to be at all times? Certainly. We now have a program to address that issue in urban markets.”

The company has also sought to address execution problems by revamping its oversight structure. Family Dollar has moved away from its district manager system with one person being responsible for a large number of stores to an area manager system covering fewer stores. Each area manager is responsible for approximately 25 locations giving them the ability to have more face-to-face contact with store personnel.

“In the past, we wouldn’t have the people to go in and keep a store running smoothly,” said Mr. Mahoney. “This gives us more flexibility.”

The company has also stepped up its manager’s training program. The company has set up designated training stores with certified trainers for new managers to work in before taking over locations themselves.

Moderator’s Comment: What challenges do you see facing Family Dollar and other dollar stores? What do you think about Family Dollar’s plans for fixing
its urban store problem?

George Anderson – Moderator

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