WASHINGTON -- Having recaptured lost sales after a rocky period in the late Eighties, officials at Family Dollar Stores Inc. are now setting out to fine-tune the discounter's strategy.

Their goal: to solidify the chain's position as a neighborhood convenience discount store for low- and low-middle income shoppers.

On Family Dollar's agenda:

  • Continued renovation of stores using a snappier new prototype, which began in the fall of 1991.

  • Emphasis on fashion apparel, highlighting such resources as Center Aisle and Chic. Basics, however, still account for 65 percent of apparel sales.

  • Phasing out low-margin items, including motor oil, tools and paints, in favor of higher-ticket items such as boom-box stereos and toys, which deliver higher returns. Though a majority of the store's 6,000 items are priced under $17.99, the retailer has expanded price points on certain items, like watches, which now go up to $25.

  • The opening of a new distribution center in West Memphis, Ark., slated for early spring. This center and the addition of point-of-sale scanning registers chainwide last October are expected to improve operating profit margins over the next few years.

  • Acceleration of its expansion. After winding up the 1993 fiscal year, ended Aug. 31, with a net gain of 165 new units, officials at the 34-year-old company plan to step up the pace, opening at least 165 units in fiscal 1994. By the end of next year, the chain is expected to grow to 2,200 units, with sales hitting $1.5 billion. Sales for fiscal 1993 climbed 12 percent to $1.29 billion from $1.16 billion, and same-store sales increased 3.9 percent. The company operates 2,091 stores.
"We have a lot of opportunities for growth, given the rash of bankruptcies among regional discount chains," said Peter J. Hayes, president and chief operating officer of the Matthews, N.C.-based company, who was interviewed by telephone.

Analysts point out that the company will benefit from the downscaling of Woolworth's, which shuttered 750 U.S. units at the end of last year.

"I bet they're mapping their expansion strategy as we speak," said Ken Gassman, a retail analyst at Davenport & Co., Richmond, Va.

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