As it relates to Brownwood/Early "Dollar" Stores .......

Family Dollar struggles to make its ``urban initiative'' a success
By PAUL NOWELL, AP

MATTHEWS, N.C. (AP) - When Rekiyta Sifford recently picked a box of Christmas ornaments at a Family Dollar store, it landed in cart filled with shampoo and other necessities. Between the cost of classes and working part-time, the 22-year-old college student from Charlotte doesn't have much cash to spend on fancy decorations.
"It's always tough," she said, but at Family Dollar, "I like the prices."
That's why she shops at a store that packs its crowed aisles with everything from motor oil and bug spray to milk and eggs. That Sifford is willing to spend money on something like Christmas decorations while shopping for shampoo is what Family Dollar Stores chairman and CEO Howard Levine is counting on to reverse a yearlong trend of declining profits.
"Our focus is still on the low-income, value-conscious consumer," Levine said. "I think it's a big reason why we have been so successful."
That success, however, has been challenged in the past year by the financial woes of its best customers, primarily low-income workers and families earning $25,000 a year or less. Struggling with layoffs and higher energy bills, they've found themselves without enough cash for a shopping spree to the nation's deep-discounters.
"All of these chains have had more difficulty achieving same-store sales," said Nick McCoy, a senior consultant at research company Retail Forward. "The economy had a lot to do with it and their core customer was hit hard by higher fuel costs, so they delay nonessential shopping trips."
Family Dollar's profits have been lower in each of the past four quarters and the company recently lowered its expectations for both sales and earnings for 2006. The company, which has nearly 6,000 stores in 44 states, had sales last year of $5.8 billion, but earnings were down to $217.5 million from nearly $258 million in 2004 - a drop of nearly 16 percent.
The company's rivals aren't doing much better. Last week, market leader Dollar General said its third-quarter earnings were off by 9 percent from the same period a year ago. The Tennessee-based chain said higher transportation costs and other expenses cut into its profit. On the same day, Dollar Tree, based in Chesapeake, Va., said its quarterly income was down 2 percent; it blamed sluggish customer traffic.
The financial troubles have led Matthews-based Family Dollar to slow down its so-called "urban initiative" as it tries to figure out how to bolster its bottom line. In 2002, the company began concentrating its expansion efforts on larger U.S. cities, building two of every three new stores in places with populations of at least 200,000.
The chain followed a year ago with a $25 million program to spruce up some of its stores in places like downtown Chicago, New York and Detroit, where the North Carolina-based discounter didn't face as much competition from its deep-discounter peers, as well as Wal-Mart and Target.
"The program turned out to be more expensive than they anticipated when they first rolled it out," McCoy said. "This slowed them down a bit."
Sales at the chain's 2,000 urban stores surpass those at its rural locations, but profits at those in inner-cities are reduced by higher rent, wages and extra security. The company's urban initiative pumped millions of dollars into about 1,300 of those stores, adding staff and other resources to improve performance, as well as installing coolers at about 1,000 stores so they could sell milk and other perishables.
But those stores' profits, even with all the improvements, didn't improve.
"After we spent all that money, all we did was break even," Levine said. "It was lot for us to take on. So we've decided to slow down to get it right."
Anthony Chukumba, an analyst with Morningstar Inc. in Chicago, said Family Dollar's problems including missing deadlines for new store openings, sometimes because of foreseeable issues such as meeting zoning requirements. Company officials also underestimated problems such as shrinkage - which is the industry term for shoplifting - in inner-city stores.
"I think their moves into urban areas are partially to serve an underserved market while at the same time insulating themselves from the big discounters," he said. "If well executed, it's a great concept, but it's been done poorly."
There are signs of progress. This week, Family Dollar reported that sales were up 9.7 percent in November, boosted by customers also buying more toys and consumer electronics - the very kind of nonessential item key to the store's profitability.
"I think Family Dollar still has good concept, offering lower to middle-income consumers compelling values in convenient locations," Chukumba said. "Their business model is definitely not irreparably broken, but they need to take steps to repair some of the mistakes they have made."

source: http://aolsvc.news.aol.com/business/article.adp?id=20051203010309990002&cid=1223
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Budget cuts may hit poor
Plans to slow Medicaid, food stamp spending could sting Texans
09:23 PM CST on Sunday, December 4, 2005
By ROBERT DODGE / The Dallas Morning News
WASHINGTON – Lawmakers returning to Capitol Hill this week face a bruising fight over whether to curtail poverty programs – decisions that could impose hardships on some Texans, including legal immigrants, children of the working poor and those dependent on child support.
A showdown is expected between conservative House Republicans and their more moderate Senate counterparts as congressional negotiators try to resolve differences in cost-cutting measures that GOP leaders argue are necessary to reduce the deficit. The problems in spending were underscored last week by Federal Reserve Chairman Alan Greenspan, whose gloomy economic forecast weighed on the stock market.
Democrats and advocates for the poor argue that program reductions are the price for Bush administration tax cuts that largely benefit higher income brackets.
The budget reduction proposals will minimally trim the growth in spending for Medicaid, food stamps and other programs.
The 2.7 million Texans receiving Medicaid and the 2.4 million getting food stamps could be affected. And the changes come as a handful of states, including Texas, are dealing with the immediate and long-term costs of providing support for families displaced by hurricanes Katrina and Rita.
"The state is already under a severe budget crunch," said Scott McCown, executive director of the Center for Public Policy Priorities in Austin. Pointing to government estimates, he said Texas could lose $900 million in Medicaid funds over five years.

to read the entire article please visit: http://www.dallasnews.com/sharedcontent/dws/dn/latestnews/stories/120505dnnatmedicaid.7d09f16.html