Family Dollar Comes Up A Penny Short of Q2 Profit Expectations

Andrew Klips  |

Discount retailer Family Dollar Stores Inc. (FDO) reported fiscal second-quarter earnings on Wednesday that narrowly missed Wall Street expectations as both net sales and profits increased, fueled by an extra week of sales and a 26.6 percent rise in sales in the consumables category.

Matthews, North Carolina-based Family Dollar, which operates more than 7,600 stores across 45 states, reported second-quarter revenue of $2.89 billion, up 17.7 percent from $2.46 billion in the second quarter last year. Net income was $140.1 million, or $1.21 per share, versus $136.4 million, or $1.15 per share in the year earlier quarter.

The recent second quarter, ended February 25, included 14 weeks as compared to 13 weeks in the quarter last year.

Analysts were expecting the company to report EPS of $1.22 on revenue of $2.89 billion.

"This quarter we delivered positive results despite financial pressures that continue to challenge our customers. Following a difficult December, we were pleased with our sales results in early January,” said Howard R. Levine, chairman and chief executive at Family Dollar.

The FDO chief blamed the unanticipated delay of 2012 tax refunds for a weaker than expected end of January and start to February, but noted that sales picked back up late in the quarter as refunds were delivered to consumers.

On a 14-week basis, comparable store sales increased 2.9 percent versus the same period the year earlier.

Gross profit increased 12.8 percent to $967.1 million, or 33.4 percent of sales, compared to $857.4 million, or 34.9 percent of sales last year.

The company also said that unseasonably cold spring weather and continued financial pressures on customers has resulted in modifying their outlook on discretionary sales, which it expects to remain constrained.

For the first half of fiscal 2013, sales were $5.32 billion, compared to $4.61 billion last year. Net income has risen to $220.42 million, or $1.90 per share, from $216.77 million, or $1.83 per share the year earlier.

Looking ahead, Family Dollar sees fiscal 2013 earnings per share of between $3.73 and $3.93, compared with fiscal 2012's $3.58, and expects comparable store sales to rise 3 percent to 4 percent. The outlook assumes several things, including opening about 500 new stores and shuttering between 30 to 50 locations.

For the current quarter, Family Dollar expects earnings in the range of 98 cents to $1.08 per share. This is basically flat with Q3 last year and short of analyst expectations of EPS of $1.18.

Shares of FDO closed Tuesday ahead for the day by 41 cents at $59.80. So far in 2013, shares are lower by about 6 percent and look to be heading lower today with the earnings miss and dismal outlook.

DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not necessarily represent the views of Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to:

Market Movers

Sponsored Financial Content