Cold Case Files

Dollar Tree installing refrigerator-freezer sections on limited basis

NORFOLK, Va. -- Dollar Tree Stores Inc., Chesapeake, Va., is banking on convenience to make the cold food cases a hit in the few stores where the retailer has added them in recent months, reported The Virginian-Pilot. The refrigerator-freezer sections have appeared in select stores165 of almost 2,900 locations nationallyand Dollar Tree has no plans to roll them out chain wide, company officials told the newspaper.

This is not an all-store initiative for Dollar Tree, like Dollar General or Family Dollar, Kent Kleeberger, Dollar Tree's CFO, said last month [image-nocss] when the retailer hosted a local conference for analysts. In fact, we're pretty young in the process.

Dollar stores have gone cold in the last year or two in an attempt to jolt consumer spending that has waned in the face of climbing gasoline prices and economic uncertainty, said the report. Dollar General expanded frozen and refrigerated sections across its chain last year, and Family Dollar has begun to bring them to some of its stores, it added, citing analysts.

With consumers more focused on everyday needs and less inclined to spend on extras, the dollar chains needed new ways to stimulate sales. They enhanced the cold sections not only to draw customers who need juice and butterand who might buy other things while they are therebut also to grab those sales from customers already in the stores.

And if you can stop by on your way home at the dollar store and pick up your milk and bread, it might be more convenient than going to the grocery store, Joan L. Storms, an analyst who covers Dollar Tree and other dollar chains for investment bank Wedbush Morgan Securities Inc., told the paper. It's a traffic driver.

The new food options allow Dollar Tree to reach more low-income consumers who tend to gravitate toward Dollar General and Family Dollar, Storms said. To take food-stamp payments, a retailer must offer a certain mix of food items dictated by state law, Chelle Gagliano, Dollar Tree 's spokesperson, told the paper.

Food products typically bring tighter profit margins to retailers than other items, the report said. But those extra earnings have helped, Kleeberger said last month. In a few stores that now have the cold cases, Dollar Tree has noticed a boost in sales of both the food items and other products, he said.

Dollar General began to see improvement in sales in comparable stores, or locations open at least a year, after it added cold cases in more than half of its stores last year, Storms said. It attributed much of that improvement to those consumables, she said, and the chain has weathered the challenging consumer climate this year with better comparable-store numbers than some of its rivals, including Dollar Tree.

Dollar Tree inherited the refrigerated and frozen cases inside the Dollar Express chain, which it acquired in 2000. The retailer's recent move toward larger stores has also provided it the space to experiment with cold cases, Gagliano said.