US retailer Family Dollar Stores has intends to increase its private-label sales and penetration, particularly in key food and consumables categories.

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Speaking yesterday (11 February) at the Deutsche Bank small and mid cap conference, Family Dollar CFO Kenneth Smith said the company sees an opportunity to increase consumable private-label sales over the next year.

“Private label resonates very well with our customers. What we’ve done to build on our existing private label offering is we’ve created a dedicated team, we have dedicated resources, they are building out and defining the strategy – or road map – to build on that offering,” Smith revealed.

Smith said the company aims to increase its own-label sales from its current level of 10% of total sales to between 15% and 20%.

Family Dollar also intends to increase its own-label brand penetration from 19% to 25%, Smith added.

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An expanded private-label offering will not only help drive top-line growth, but also improve Family Dollar’s gross margin, Smith suggested.

“We really see the opportunity on the consumables side of the business… a real opportunity that resonates well with our customers to drive that private label offering and also our gross margin,” he said.

Following the investor conference, Northcoast Research analysts issued a note claiming that the company’s plans to reengineer the private label offering would lead to ID sales gains and margin expansion.

“We think investors are underestimating the impact that the improved private label offering will have on operating trends,” Northcoast analysts wrote.

Shares in Family Dollar closed slightly up yesterday, rising from an opening price of US$31.32 to close at $31.75.

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