The company hopes to drive comparable-store sales by focusing on local market share positions as it continues the expansion of its supercenter format. Operating about 985 million square feet globally, the company historically grew square footage at least 8% annually. In the third quarter of FY 07, the company outlined a plan to refocus new store expansion on maximizing returns on invested capital rather than trying to maintain an 8% square footage growth target. As a result, the company expected U.K square footage growth to moderate. In FY 12, the company plans to slow square footage growth in the domestic market while accelerating growth internationally. We believe this new focus will result in improved performance at existing locations as the company maximizes existing store volumes before adding a new nearby warehouse. Due to the resulting decrease in capital expenditures, we believe the company will use excess cash to accelerate share repurchases, increase dividends and pursue international acquisitions.
Competitive Advantage Analysis
Another discounter drawing market attention is Family Dollar, which received an unsolicited cash offer in February 2011 of $55 to $60 per share by investment firm Trian Group, led by Nelson Peltz. Trian, which is among Family Dollar’s largest shareholders, with an approximate 8% stake, also offered chairman and CEO Howard Levine an opportunity to participate in the buyout. Following a review of the offer, Family Dollar’s board of directors announced on March 3, 2011, that a sale of the company was not in the best interest of shareholders and that the company had adopted a shareholder rights plan, also known as a “poison pill,” aimed at reducing the likelihood of a hostile takeover. Later, in September, Nelson Peltz’s son-in-law, Edward Garden, was given a seat on Family Dollar’s board following Trian Group’s withdrawal of its offer. (California State Publications, 2011)