CHESAPEAKE, Va. — Dollar Tree here is ramping up the rollout of refrigerated and frozen foods in its stores in 2010, although it faces some restrictions, the company said last week in a conference call discussing year-end financial results.
The dollar-store chain rolled coolers and freezers out to 197 locations in 2009, bringing the total number of stores with such offerings to about a third of its 3,800-unit store base. In 2010, the company plans to add freezers and coolers to another 225 locations.
“While adding more new stores, we're also learning what our customers need, and we're refining our frozen and refrigerated assortments to provide more value and excitement for customers in the existing stores,” said Bob Sasser, president and chief executive officer. The addition of frozen and refrigerated products and the increased mix of high-value, fast-turning consumer basics is driving footsteps into our stores on a more frequent basis.”
The fast-turning basics include items like light bulbs and batteries, he said.
The rollout of freezers and coolers is limited to some degree by restrictions on distribution, Sasser explained, in response to a question from an analyst about food products and the acceptance of food stamps.
“Whether or not we put the freezers and coolers in and take food stamps is determined somewhat by the customer and the market that we're serving as well as our supply chain,” Sasser said. “We have nine [distribution centers] that we ship things long distances from, but for our frozen and refrigerated, we have other suppliers — it's more of a hub-and-spoke delivery that we have to employ. So we are restricted in some cases by the real estate, and in some cases, we find restrictions that we have to work through from the supply chain and availability of the product; and in some cases, it's just the size and volume of the store.”
Many of the company's newer stores are larger than older locations — about 10,000 square feet — to accommodate the additional product, Sasser explained.
The company said both foot traffic and ticket size increased in the fourth quarter. The fourth quarter was the only period during the fiscal year that saw an increase in basket size, with a gain of 0.8% over year-ago levels.
“We think that while we've gotten a lot of new shoppers into our stores, people that have tried us for the first time due to maybe just trying to balance their budget and find a way to find those things that they need, we think maybe they're coming back and now they're buying a little bit more,” Sasser explained.
He also said he believes the concept will be able to retain business even as the economy improves.
Net income for the quarter, which ended Jan. 30, was up 28.3%, to $135 million, on a 12.4% increase in sales, to $1.56 billion. Comparable-store sales rose 6.6% for the period. For the full year, net income was up 39.7%, to $320.5 million, on a sales gain of 12.6%, to $5.23 billion. Comps were up 7.2% for the year.
The chain added 240 new stores in 2009 and plans 220 new Dollar Tree locations and 25 new Deal$ locations in 2010.