family dollar stores ar2007

Post Office Box 1017 / Charlotte, North Carolina 28201-1017 / www.familydollar.com

“Family Dollar is my store.”

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18491

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5320

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23

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114 144

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MaquoketaDistribution

Center

MoreheadDistribution

Center

RomeDistribution

Center

OdessaDistribution

Center

DuncanDistribution

Center

West MemphisDistribution

Center

MariannaDistribution

Center

Front RoyalDistribution

Center

MatthewsCorporate Officesand Distribution

Center

’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07

Number of Stores(as of fiscal year end)

Distribution Service Areas

Stores and Distribution Centers(as of fiscal year end)

2,76

7

3,01

7

3,32

4

3,68

9

4,14

1

4,61

6

5,02

7

5,46

6

6,17

3

6,43

0

Rome, New York907,000 Sq. Ft. / Opened ’06

Marianna, Florida907,000 Sq. Ft. / Opened ’05

Odessa, Texas907,000 Sq. Ft. / Opened ’03

Maquoketa, Iowa907,000 Sq. Ft. / Opened ’02

Morehead, Kentucky907,000 Sq. Ft. / Opened ’00

Duncan, Oklahoma907,000 Sq. Ft. / Opened ’99

Front Royal, Virginia907,000 Sq. Ft. / Opened ’98

West Memphis, Arkansas850,000 Sq. Ft. / Opened ’94

Matthews, North Carolina890,000 Sq. Ft. / Opened ’74

Corporate ProfileFamily Dollar is one of the fastest growing discount store chains in

the United States. During the last ten years, more than 4,000 new

stores have been added to the chain, of which over half were opened

in the last five years. The merchandising strategy that drives this

growth provides customers with good values on basic merchandise for

the family and home in a small neighborhood store. Our merchandise

is sold at everyday low prices in a no frills, convenient, self-service

environment. Most merchandise is priced under $10.00.

Stores are located in a contiguous 44-state area ranging northeast to

Maine, southeast to Florida, as far northwest as Idaho and southwest

to Arizona. Family Dollar stores generally range in size from 7,500

to 9,500 square feet, and most are operated in leased facilities. The

relatively small size enables us to open new stores in rural areas and

small towns, as well as in large urban neighborhoods. Within these

markets, our stores are located in shopping centers or as freestanding

buildings or in urban storefronts convenient to our value-conscious

customer base.

During the fiscal year ended September 1, 2007, we opened 300 new

stores and closed 43 stores to bring the number of stores in operation

at fiscal year-end to 6,430.

Our headquarters are located in Matthews, North Carolina, just outside

of Charlotte. We operate automated full-service distribution centers in

Matthews; West Memphis, Arkansas; Front Royal, Virginia; Duncan,

Oklahoma; Morehead, Kentucky; Maquoketa, Iowa; Odessa, Texas;

Marianna, Florida; and Rome, New York. Family Dollar has been a

publicly held corporation since 1970 and its Common Stock is listed on

the New York Stock Exchange under the ticker symbol FDO.

22

30

61

129

20

102

88

10

68

34

139

239401

300

194

343

211

258

44

282

201

184

345

93

98

225

21

31

35

126

797

18491

21

78

5320

98

23

114

11

343

114 144

5


Center


Center

RomeDistribution

Center

OdessaDistribution

Center

DuncanDistribution

Center


Center


Center


Center


Center

’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07




2,76

7

3,01

7

3,32

4

3,68

9

4,14

1

4,61

6

5,02

7

5,46

6

6,17

3

6,43

0










In 1959, we opened our first Family Dollar store. Since then, we

have grown into a $6.8 billion company with more than 6,400

stores in 44 states. Our success is a result of our commitment

to providing our customers with a compelling place to shop, our

Associates with a compelling place to work, and our investors

with a compelling place to invest. In pursuit of this mission, we

continue to make significant changes to our business.

Our customers know they can count on us for value and

convenience, and we are expanding our merchandise

assortment to meet even more of their everyday needs. From

ready-to-eat meals, to an unexpected little treasure, we want

to provide customers with a valuable shopping experience. When Mom walks in the door of a

Family Dollar, we hope she’ll find everything she needs for her home and family.

Our Family Dollar team is our most valuable asset. As we strive to be a compelling place to

work, we are improving our Associate recruiting, training and retention programs. We have

developed a solid team of Associates by cultivating strong internal talent and complementing

their knowledge with experienced industry leaders. We have ambitious objectives for our

Company, and we rely on talented, committed Associates to help us achieve our aspirations.

Despite difficult macro-economic headwinds, we are improving our business. We are expanding

our selection of food, improving the quality of our apparel and home decor, and strengthening

our assortment of seasonal items. But, even as we invest in our business to better position

Family Dollar for the future, we are committed to improving our returns to shareholders through

better inventory productivity and more profitable stores.

In today’s difficult economic environment, our customers need the value and convenience we

offer more than ever. Our management team remains focused on delivering a better shopping

experience for our customers, a more successful work experience for our Associates, and a

stronger investment for our shareholders.

Howard R. LevineChairman of the Board and Chief Executive Officer

NOVEMBER 2007

Fam

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amily D

ollar D

ollarF

amily

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“Our Store is your Store.”

Family Dollar Mission Statement

F O R O U R C U S T O M E R S

A compelling place to shop:by providing convenience and low prices

F O R O U R A S S O C I AT E S

A compelling place to work:by providing exceptional opportunities

and rewards for achievement

F O R O U R I N V E S T O R S

A compelling place to invest:by providing outstanding returns.

At Family Dollar, value means good quality items at affordable prices. Our primary

customer is a hard-working Mom who wants to take good care of her home and family

within limited means. For her, it’s a constant budget-balancing act between the needs

and wants of her family. That’s why she shops at Family Dollar. Good value is being able

to afford an electronic hand-held game for her son or a rose-scented candle for herself, in

addition to Scott Towels and Hefty Garbage Bags. The exciting discovery of a small luxury

she can afford is the value of Family Dollar.

For years Family Dollar has been known for name brand products at low prices in

a variety of categories including household cleaning products, paper goods and health

and beauty aides. But, we’ve improved our home and apparel categories, adding

items like thicker, plusher towels, petal-soft sheets and clothes that make the whole

family look great, all at a fraction of department store prices. The pleasure our shoppers

experience from being able to buy that unexpected treasure is what sets us apart from

the competition.Valu

eV

alue

2 3

“Family Dollar is my store for Value.”

“Kids“Kids grow grow up up so so fast. fast. Family Family Dollar Dollar sells sells great great quality quality

kidskids clothes, clothes, and and I I don’t don’t have have to to spend spend an an arm arm and and a a leg leg

forfor things things they’ll they’ll outgrow outgrow quickly.” quickly.”

“When“When I I go go to to my my

FamilyFamily Dollar, Dollar, I I

knowknow they they will will

havehave everything everything

II need need to to help help me me

getget the the kids kids ready ready

inin the the morning. morning.

AndAnd buying buying what what

II need need won’t won’t break break

mymy budget.” budget.”

2 3

4 5

“It“It was was my my turn turn

toto buy buy the the snacks snacks

forfor my my son’s son’s team, team,

soso my my boyfriend boyfriend

andand I I went went to to my my

FamilyFamily Dollar Dollar and and

gotgot everything everything

wewe needed. needed. He He

eveneven bought bought my my

sonson a a toy.” toy.”

Con

venien

ceC

onven

ience

Con

venien

ceC

onven

ience

We all lead busy lives and Family Dollar customers are no different. Like everyone else,

they’re in a hurry. Our stores, conveniently located in local neighborhoods, are a

perfect fit for families who don’t have time or money to waste.

Our small-store format, less than 10,000 square feet, allows the customer to find what

she needs quickly. Our convenient neighborhood locations make it easy for a busy

Mom on the go to run in on her way home from work. And the easy in and out access of

“Family Dollar is my store for Convenience.”

4 5

our stores makes it easier for Mom to get home to her hungry family faster.

With two-thirds of all spending occurring in the top fifty metropolitan markets, Family Dollar

is maximizing opportunities to serve families in urban markets. Many retailers avoid

these markets, but we understand that urban shoppers need the same convenience,

value and fun that Family Dollar offers to customers everywhere.

“On“On the the way way home home from from work, work, I’m I’m in in a a hurry. hurry. I I

cancan run run in in my my Family Family Dollar, Dollar, grab grab exactly exactly what what

II need need and and be be home home and and out out of of my my of of of of shoes shoes before before

I’dI’d even even get get to to the the checkout checkout in in a a superstore.” superstore.”

6 7

Whether it’s a single mom picking up a last minute snack for her son’s class party or a

grandmother getting the perfect jumper for her granddaughter, value and convenience

are the cornerstones of providing our customers with a compelling place to shop. But

Family Dollar offers more than just the merchandise our customers need at prices they

can afford. We continually surprise our customers with small luxuries they may not

have been able to afford elsewhere. These “treasures” are the little things that help

our customer create a warm, comfortable home for her family.

Our customers want well-made fashionable apparel for their families, and we carry

the national brands and quality apparel they are looking for. And at Family Dollar,

our customers can dress their homes fashionably too. Our merchandise teams scour the

world to find upscale home décor at a fraction of department store prices.

The addition of coolers for perishable food and our expanded assortment of non-

perishable food items fill a constant need. Mom hurries home late from work and needs

to run in to her Family Dollar for a quick dinner to feed the family. Dad forgot Mom’s

birthday…again. A last minute trip to Family Dollar right down the street, and he arrives

home armed with a lovely gift bag of treasures to delight her.

Family Dollar is a friend and neighbor to the people we serve. Our customers can count

on us to be there for them.

Fam

ilyF

amily

Fam

ily

“Family Dollar is my Family’s store.”

6 7

“We“We love love our our Family Family Dollar. Dollar. It’s It’s right right

downdown the the block block so so it’s it’s easy easy to to run run in in

andand get get everything everything we we need need all all in in

oneone place.” place.”

“What“What a a treat treat it it is is to to see see my my

grandsongrandson smile. smile. Family Family Dollar Dollar is is a a

greatgreat place place to to spoil spoil him, him, especially especially

duringduring the the holidays. holidays. And And with with the the

moneymoney I I have have left, left, I I can can buy buy myself myself

aa little little something something too!” too!”

8 9

In today’s difficult economic environment, families need the value and convenience

Family Dollar provides. To serve our customers’ needs better, we are enhancing our

selection of food. Coolers will be installed in more stores, and we plan to expand our

space for food in 2,500 additional stores. We also continue to enhance our merchandise

selection in other categories. With the on-going development of our Treasure Hunt

initiative, we will provide more of the special extras for the family and home that make

Family Dollar such a fun place to shop.

We are also making significant investments to improve the shopping experience for

our customers. Our Concept Renewal initiative involves improving new and existing

stores with more intuitive layouts, better adjacencies and new color-coded signage. Stores

will be easier to navigate for our customers and easier to operate for our Associates. Our

Store of the Future initiative, which is planned to grow by 1,500 stores this year,

will enable Family Dollar to accept Electronic Benefit Transfer payments, including food

stamps, giving customers even more options at the checkout line. Store of the Future

technology will also provide our store managers with better analytics and workflow

management. The essential benefit of these improvements to the customer is that

checkout for our busy Mom will be faster and more convenient than ever.

Investm

ent

Investm

ent

Investm

ent

Investm

ent

Investm

ent

Investm

ent

“Family Dollar moving Forward.”

8 9

“I’ve made made so so many many friends friends working working at at Family Family Dollar. Dollar.

MyMy customers customers all all live live in in the the neighborhood neighborhood and and I I see see

somesome of of them them of of of of every every week. week. They They are are really really happy happy that that

theythey can can afford afford to to buy buy all all of of the the of of of of stuff stuff they they stuff stuff stuff stuff need. need. I I feel feel

goodgood about about that.” that.”

10 11

Associates

Associates

Associates

Associates

10

Associates

1010

At Family Dollar, we’re more than just a compelling place to shop for our customers;

we’re also a compelling place to work for our Associates. As a growing Fortune 500

company, we have career opportunities ranging from in-store to distribution centers to

the Corporate Office.

Recruiting and retaining Associates is critical to the success of our Company. We

take great pride in providing the people who work at Family Dollar with clear career

paths. In addition, we are strengthening the link between pay and performance and

improving our Associate benefit plans.

“I“I never never thought thought a a

careercareer at at Family Family

DollarDollar could could be be

thisthis rewarding. rewarding.

II love love knowing knowing

thatthat I I am am part part of of

aa team. team. Everyone Everyone

worksworks well well

together,together, and and I I

enjoyenjoy knowing knowing

thatthat what what I I

dodo everyday everyday

reallyreally makes makes a a

difference.”difference.”

Leadership TeamHoward R. LevineChairman of the Board andChief Executive Officer

R. James KellyPresident andChief Operating Officer

Robert A. GeorgeExecutive Vice President –Chief Merchandising Officer

Charles S. Gibson, Jr.Executive Vice President –Supply Chain

Barry W. SullivanExecutive Vice President –Store Operations

Bryan P. CauseySenior Vice President –Planning, Allocation andReplenishment

Dorlisa K. FlurSenior Vice President –Strategy and BusinessDevelopment

Keith M. GehlSenior Vice President –Store Construction andFacilities Management

“Family Dollar is my Future.”

10 11

No matter where you work within the Family Dollar team, we are committed to developing

talent and promoting from within. We offer hands-on training programs, excellent

growth potential, merit-based promotions, competitive salaries and so much more.

There’s nothing better than feeling that you’re part of a team. At Family Dollar, the growth

and success of the Company depends upon the individual contribution of each Associate.

Together, we are fulfilling our mission of making Family Dollar a more compelling place to

shop, work and invest.

Joshua R. JewettSenior Vice President –Information Technologyand Procurement, CIO

Janet G. KelleySenior Vice President –General Counsel and Secretary

Michael S. KvitkoSenior Vice President –Merchandising

Wook LeeSenior Vice President –Global Sourcing

Thomas M. NashSenior Vice President –New Stores

John J. ScanlonSenior Vice President –Merchandising

Kenneth T. SmithSenior Vice President –Chief Financial Officer

C. Martin SowersSenior Vice President – Finance

Elizabeth M. AustinVice President – InformationTechnology Operations andInfrastructure

Raina AvalonVice President –Transportation

Samuel J. BernsteinVice President –General Merchandise Manager

Earl C. BonnecazeVice President –Store Operations

James R. BowenVice President – Distribution

Timothy R. BrokawVice President –Decision Support

Mark S. ChidesterVice President –Human Resources,Store Operations

Charles D. CurryVice President –Store Planning andStore Development

Allen W. FieldsVice President –Store Operations

Marianne FiorucciVice President –Planning and Allocations

Eric C. GordonVice President –Business Applications

Joseph A. Hayes, IIIAssistant General Counsel,Corporate and Compliance

James H. HaysVice President – Internal Audit

Dennis A. HeskettVice President –Store Operations

Billy W. Jones, Jr.Vice President – Distribution

Michael LaurentiVice President –Information Technology

Timothy A. MatzVice President –General Merchandise Manager

Colin McGinnisVice President –Store Operations Support

Dennis C. MerriamVice President –Human Resources, Distribution

Jacob J. ModlaAssistant General Counsel,Litigation

Stephen F. PhillipsVice President –Store Operations

Kiley F. RawlinsVice President –Investor Relations andCorporate Communications

Richard P. SiliakusVice President –General Merchandise Manager

Donald G. SmithVice President – Marketing

R. Jeffrey ThomasVice President –Replenishment

Mike VickersVice President –Store Operations

Boris ZelmanovichVice President –General Merchandise Manager,Food and MerchandiseInnovation

Scott T. ZuckerVice President –Merchandise Operations

Michael J. ZuegeVice President –Loss Prevention

Years Ended (In thousands, except per share amounts) September 1, 2007 August 26, 2006 August 27, 2005

Net sales $ 6,834,305 $ 6,394,772 $ 5,824,808

Cost of sales 4,512,242 4,276,466 3,908,569

Gross margin 2,322,063 2,118,306 1,916,239

Selling, general and administrative expenses 1,933,430 1,756,001 1,577,429

Litigation charge — 45,000 —

Operating profit 388,633 317,305 338,810

Interest, net 6,737 6,161 (3,985)

Income before income taxes 381,896 311,144 342,795

Income taxes 139,042 116,033 125,286

Net income $ 242,854 $ 195,111 $ 217,509

Net income per common share – basic $ 1.63 $ 1.26 $ 1.30

Net income per common share – diluted $ 1.62 $ 1.26 $ 1.30

Dividends declared $ 66,361 $ 62,757 $ 61,538

Dividends declared per common share $ 0.45 $ 0.41 $ 0.37

Cash and investment securities $ 284,671 $ 216,232 $ 138,705

Total assets $ 2,624,156 $ 2,523,029 $ 2,409,501

Working capital $ 406,977 $ 432,737 $ 460,157

Long-term debt $ 250,000 $ 250,000 $ —

Shareholders’ equity $ 1,174,641 $ 1,208,393 $ 1,428,066

Comparable store sales gain 0.9% 3.7% 2.3%

Stores opened 300 350 500

Stores closed 43 75 68

Number of stores – end of year 6,430 6,173 5,898

F

Fin

ancials

Fin

ancials 20

.0

19.6

15.7

14.8

20.4

243

258

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195

243

’03 ’04 ’05 ’06 ’07 ’03 ’04 ’05 ’06 ’07 ’03 ’04 ’05 ’06 ’07 ’03 ’04 ’05 ’06 ’07 ’03 ’04 ’05 ’06 ’07

4,75

0

5,28

2

5,82

5

6,39

5

6,83

4

Net Sales(millions of dollars)

Net Income(millions of dollars)

Returnon Average

Shareholders’Equity(percent)

3.8

1.9

2.3

3.7

0.9

Comparable StoreSales Gains

(percent)

1.40

1.50

1.30

1.26

1.62

Net IncomePer Diluted

Common Share

12

amily Dollar financial highlights.

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Center


Center

RomeDistribution

Center

OdessaDistribution

Center

DuncanDistribution

Center


Center


Center


Center


Center

’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07




2,76

7

3,01

7

3,32

4

3,68

9

4,14

1

4,61

6

5,02

7

5,46

6

6,17

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6,43

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22

30

61

129

20

102

88

10

68

34

139

239401

300

194

343

211

258

44

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201

184

345

93

98

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21

31

35

126

797

18491

21

78

5320

98

23

114

11

343

114 144

5


Center


Center

RomeDistribution

Center

OdessaDistribution

Center

DuncanDistribution

Center


Center


Center


Center


Center

’98 ’99 ’00 ’01 ’02 ’03 ’04 ’05 ’06 ’07




2,76

7

3,01

7

3,32

4

3,68

9

4,14

1

4,61

6

5,02

7

5,46

6

6,17

3

6,43

0










Post Office Box 1017 / Charlotte, North Carolina 28201-1017 / www.familydollar.com

Fam

ily Dollar

Fam

ily Dollar

family dollar stores ar2007

Economy & Finance