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Not Worth A Buck: Shares Of Family Dollar Continue To Fall Following 2Q14 Results And Resulting Actions

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Shares of Family Dollar Stores (NYSE: FDO) are down more than 2.9 percent following disappointing second quarter results and the company's resulting actions to improve results.

In the press release, Chairman and CEO Howard R. Levine commented, "Our second quarter results did not meet our expectations. The 2013 holiday season was challenged by a more promotional competitive environment and a more financially constrained consumer. In addition, like many retailers, our second quarter results were significantly impacted by severe winter weather, which resulted in numerous store closings, disrupted merchandise deliveries and higher than expected utility and store maintenance expenses."

Family Dollar announced that second quarter profit declined to $90.9 million, or $0.80 per share, versus a year-ago profit of $140.1 million, or $1.21 per share. Analysts were expecting earnings of $0.90 per share. The company reported revenue of $2.72 billion, coming in below analysts estimate of $2.77 billion. Family Dollar reported that same-store-sales were down 3.8 percent due to a decreased number in customer transactions, and partially offset by higher average customer transaction value.

In the first fiscal half of 2014, the company repurchased 1.8 million shares of its common stock for $125 million and paid $59.5 million in dividends to shareholders. Family Dollar opened 244 new stores and closed 22. The company renovated, relocated or expanded 319 stores.

Management expects comparable store sales to decline in the low-single-digit range in the third quarter. Family Dollar projects current-quarter earnings of $0.85 to $0.95 per share and full-year earnings of $3.05 to $3.25 per share. For fiscal 2014, the company assumes a decline in profit, capital expenditures between $450 million and $500 million, 525 new store openings, and 400 store closings.

To help minimize loss, increase efficiencies, and strengthen its value, Family Dollar announced four immediate strategic actions. The actions include,

  • "Investing significantly to lower prices on nearly 1,000 basic items to deliver even more compelling values to customers
  • Reducing corporate overhead and re-aligning key organizational functions to improve execution and reinforce the Company's commitment to being an efficient, low-cost retailer.
  • Closing approximately 370 underperforming stores in the second half of fiscal 2014.
  • Slowing new store growth beginning in fiscal 2015. The Company now plans to open 350-400 new stores in fiscal 2015, down from approximately 525 new stores in fiscal 2014. The reduction is designed to improve return on investment by capitalizing on insights regarding location, competitive dynamic and cost structure."

Shares of Family Dollar Stores closed at $59.07 on Wednesday. The stock continues to trend downward trading as low as $57.35, nearing the 52-week low of $57.28.

Posted-In: Second Quarter FinancialsEarnings News Guidance Buybacks Management


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