Get a Stock Bargain at Family Dollar

Food: In fiscal 2007, the company plans to beef up its food strategy by expanding its cooler program to 1,200 more stores, bringing the storewide total to 5,000. It also plans to expand food offerings in about another 2,000 stores while revamping its technology in 1,000 stores so shoppers can use food stamps. All told, these initiatives make Family Dollar food offerings more attractive. And because shoppers return often to shop for food, this move bodes well for Family Dollar down the road.

Specials: Family Dollar's Treasure Hunt program gives bargain-conscious shoppers a chance to buy products that they wouldn't normally find at Family Dollar, such as imported and luxury-like items. This year, the company wants to further enhance its Treasure Hunt program through more event-driven offerings, better product presentation, improved apparel selection and better inventory flow.

I like this move. Treasure Hunt programs are becoming more common in the variety store space, and these out-of-the-ordinary, new selections create buzz, excitement and fun for shoppers. Plus, they add variety to a typically plain-vanilla merchandise palette. The items can also carry higher margins, which helps to offset the typically lower-margin standard merchandise mix.

Expansion: The company plans to open 300 new stores -- a huge driver of growth -- this year. And with 170 new Family Dollars already online in 2007, management is on track to make that huge goal. Plus, Family Dollar is slated to beef up its site acquisition machinery and continue to focus on new-store performance. It also plans to strengthen its merchandising and supply chain management by reviewing processes, technology tools and people, all big positives in my book.

Improving Fundamentals

During the fiscal second quarter that ended March 3, Family Dollar booked sales of $1.9 billion, a 12% pop from the year-ago's $1.7 billion. And while same-store sales eked out just a 0.4% increase during the quarter, the company expects same-store sales in the 1% to 3% range for the year. Certainly that's not blowing me away, but it's in line with the group.

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At the time of publication, Burritt had no positions in any of the stocks mentioned in this column, although positions may change at any time. Wayne Burritt is president and director of equity research for Burritt Research, which operates BurrittResearch.com. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Burritt appreciates your feedback; click here to send him an email.