【maytronics power supply not working】Connecticut's Fiscal Problems Require a Full-Court Press
Gov. Ned Lamont has his maytronics power supply not workingfiscal work cut out for him. (Photo: Michael Marciano/ALM)
Our new governor, Edward Miner “Ned” Lamont Jr., inherits a challenging financial environment. Years of governmental mismanagement, failure to make legally mandated pension contributions, stagnant economic growth and tax revenues have all contributed to this miasma. While there is no quick fix for this problem, one partial solution could be to re-examine how our state government operates to determine whether we can run it more efficiently and at less cost. That analysis may well start with our judicial system.
Few observers of our court system would assert that it is a model of efficiency. In many places, there are excessive personnel to perform court functions. There are also unnecessary physical locations for a state of our size. Many courts are underutilized during the course of the day. These factors combine to create a system that costs more than it should and is more than we can afford.
How can these issues be addressed in a meaningful way? Several possibilities exist. First, re-evaluate the need for all of our courthouses. The state currently operates 23 Geographical Area courthouses. They are expensive to operate from a facility and personnel basis. Are they all needed? For example, is there a compelling need to operate G.A. courthouses in places like Bristol and Enfield? These are locations with small dockets and operate on essentially a part-time basis. Could not these dockets be respectively folded into the Torrington/New Britain and Hartford/Rockville G.A.’s?
Further, does there need to be a G.A. courthouse in both Derby and Milford? Milford currently serves only two towns, Milford and West Haven, neither of which are population centers. No other G.A. in the state covers only two towns. There is no apparent reason to operate G.A. courts in both of those locations. Since there is nothing legally sacrosanct about which court handles cases from a particular town, a restructuring of the G.A.s should be considered.
Also, the number of new criminal cases in the G.A.s has shrunk from 139,428 in fiscal year 1994-1995 to 84,899 in fiscal year 2017-2018. The number of new motor vehicle cases in the G.A.s has shrunk from 221,183 to 144,936 in the same period. Given these figures, should the number of facilities and staff remain the same?
Second, we should consider the expanded utilization of part-time personnel in our court system with either no or substantially reduced benefits, particularly with regard to prosecutors and public defenders. Historically, the system utilized these type of positions by employing numerous private practitioners. The benefits of that arrangement are obvious. The state is able to hire competent, experienced counsel to assist with dockets while not bearing the costs of full-time salaries and benefits for these individuals. Further, the schedule of these attorneys can be adjusted to meet the docket needs of each courthouse. In these times of fiscal duress, where personnel are not needed the taxpayers should not be paying for them. Simply put, the issue of court structure warrants examination by a statewide commission whose charge would be to create a more efficient and less costly operation to better serve the citizens of our state.
Connecticut’s fiscal problems can be solved. There is no reason a state with our strong per capita income should be struggling to meet its financial responsibilities. To do so, we must put our state expenditures in far better order. Our judicial system would be a good place to start.
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- 5%, led by a 17% increase in average ticket and a slight decline in traffic. Growth in the quarter reflected the impact of households stocking up on essentials like paper goods and cleaning supplies as the pandemic became a nationwide concern, along with strength in discretionary categories as the quarter came to a close and stimulus dollars and tax refunds were disbursed.
As shown below, the results in the quarter materially changed the trend in two-year stacked comps for each of the banners, along with a significant acceleration for consolidated comps.
The increase in consolidated comps was the primary driver of an 8% increase in revenues to $6.3 billion. The company ended the quarter with 15,370 locations, up less than 1% year-over-year. This reflects a 7% increase in Dollar Tree units, offset by a 4% decline in Family Dollar units.
The top-line results at each banner flowed through to their respective income statements, with Dollar Tree gross margins and operating margins declining year-over-year while Family Dollar gross margins and operating margins expanded year-over-year. On a consolidated basis, gross margins contracted by 120 basis points in the quarter to 28.5%, reflective of a shift to lower-margin consumables, tariff costs and the impact of markdowns from the Easter headwinds at the Dollar Tree banner. The company saw slight operating leverage on SG&A from higher comps, with the net result being an 80 basis point contraction in operating margins to 5.8%, with operating income declining 5% to $366 million. This is not adjusted for $73 million of pandemic-related costs, such as PPE supplies.
In the first quarter, the company opened 85 stores (net of closures) and completed 220 Family Dollar renovations to the H2 format. Importantly, comps at renovated Family Dollar stores continue to outpace the chain average by more than 10%. On the call, management indicated that they plan on reducing both the number of new store openings (from 550 to 500) and the number of H2 renovations (from 1,250 to 750) in 2020.
Personally, given the fact that Family Dollar is seeing material benefits to its business from the pandemic with new or lapsed customers coming into its stores, I think the company should try to get more aggressive with its renovation plans, not less. On the other hand, you could argue that renovations cause short-term disruptions and limit their ability to fully capitalize on the business momentum they are currently experiencing.
As a result of fewer new stores and remodels, management now expects 2020 capital expenditures to total $1.0 billion compared to previous guidance of $1.2 billion. In addition, the company has temporarily suspended share repurchases. At quarter's end, the company had $1.8 billion in cash on its balance sheet compared to $4.3 billion in total debt.
Conclusion
In recent years, Dollar Tree has been a tale of two cities. While its namesake banner has generally delivered impressive financial results, Family Dollar has been a persistent underperformer. This quarter, those results flipped, and given what we've seen in the weeks since quarter's end, there's a decent possibility that we will see something similar in the coming months. As the CEO noted, the second quarter is off to a very good start at Family Dollar.
Here's the important question: how useful is that information is in terms of making future predictions about the business? Will recent success at Family Dollar translate into long-term success for the banner? The optimistic take is that new or lapsed customers, especially those visiting the renovated stores, could become recurring business for the banner. The pessimistic take is that they have experienced short-term success out of necessity as people went to any store that was open to try and find essentials like toilet paper and hand sanitizer that were largely out of stock throughout the retail landscape. From that view, many of these customers could abandon the retailer when life returns to normal. As Philbin noted on the conference call, early on [during the pandemic], folks needed us. Will people still shop as much at Family Dollar when it's no longer a necessity?
Personally, I do not place too much weight on the recent results. I will need to see incremental data points that indicate that Family Dollar has truly won sustained business from these new customers. While I still believe that the Dollar Tree banner is a well-positioned retailer with attractive unit returns, I'm not yet willing to say the same thing for Family Dollar. For that reason, along with the recent run-up in the stock price, I plan on staying on the sidelines for now.
Disclosure: None
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