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Bill Ackman’s Speech at Ira Sohn Transcribed

William AckmanInsider Monkey transcribed Bill Ackman’s speech from the Ira Sohn conference. Ackman is bullish on Family Dollar Store (FDO), which is 5% since Ackman’s speech. Insider Monkey already transcribed David Einhorn’s speech, which can be found here, (if you are not familiar with David Einhorn, check out his resource page here-David Einhorn Resource Page), and will be transcribing all the speakers over the coming days. I will be posting a resource page devoted to Bill Ackman tomorrow, so make sure to check back then.

Without further to do, here is a brief excerpt followed from Ackman’s speech.

The idea is Family Dollar. It’s a $6.5 B market cap company. It trades at 14 PE. Let me tell you about the business. First of all, this is a company in retail that serves lower-income, middle income consumers. What I like about it is actually it serves them well. Unfortunately a lot of companies that serve this segment of the marketplace take advantage of this type of marketplace. But here we have a company that basically prices slightly above Walmart, offers more convenience, and as a result is good for low income community. They sell the kind of stuff WalMart, but in 7K square-foot stores. It’s more convenient, you take a few steps from the parking lot, walk in, spend less than 10 minutes in the store. It’s actually remarkably good business.

Let’s keep going. 15 minutes. Discount price versus competitors. Drug stores also sell the same kind of goods today. They charge 20% more, supermarkets about 15% more. And WalMart about 5% less, but you’ve got to drive to WalMart and spend a lot of money on gas. And that makes this much more attractive to your daily fill up type person. There’s a lot of customers living paycheck to paycheck and can’t go to WalMart and buy a few weeks of supplies. They have to buy for a few days.

If you look at growth, they slowed growth way down. I think they were figuring things out,  but they figured things out and reaccelerated growth recently. You’re going to see return of 5-7% annual unit growth. Terms of economics of the typical store, our estimates based on what we’ve been able to glean, they spend about $325K per store. Very quickly store ends up with peaked, stabilized revenues. Very attractive, we think something in the neighborhood at 37-50% return on investments.