UPDATE: Family Dollar Misses Q1 Expectations

reported weaker-than-expected results for the its fiscal first quarter. The Matthews, North Carolina-based company posted quarterly net income of $41.4 million, or $0.36 per share, compared to $78.0 million, or $0.68 per share, in the year-ago period. Excluding fees related to the pending merger with Dollar Tree, the company earned $0.44 per share. Its sales climbed 2.3% to $2.56 billion from $2.50 billion. However, analysts were expecting earnings of $0.62 per share on revenue of $2.57 billion. Comparable store sales for the 13-week period slipped 0.4%, while December comparable store sales rose 1.2%. Net sales of Consumables rose 3.5% in the quarter, while net sales of Discretionary categories dropped 1.3% in the quarter. Gross profit slipped to $852.9 million, or 33.4% of net sales, from $856.8 million, or 34.3% of net sales. Operating profit for the quarter was $70.7 million or 2.8% of sales. During the quarter, Family Dollar opened 59 new stores, versus 126 new store openings in the year-ago quarter. Family Dollar's merchandise inventories at November 29, 2014, rose 4.1% to $1.71 billion, from $1.65 billion at November 30, 2013. “As expected, the first quarter of fiscal 2015 was very challenging, as we continued our transition from a very promotional merchandising strategy to a more everyday low price strategy. During the quarter, gross margin continued to be pressured by the impact of our pricing investments, as well as strong growth of lower-margin consumable categories, including food and tobacco. Our team did a good job of controlling expenses; however, ongoing topline challenges and continued margin pressures impacted our net profitability,” said Howard R. Levine, Chairman and CEO. Family Dollar shares rose 0.24% to close at $78.86 yesterday.