Family Dollar posts flat 1Q profit, shares fall

Jan. 06, 2013 @ 12:05 AM

Family Dollar Stores Inc. posted fiscal first-quarter net income that was little changed compared with a year ago as its customers snapped up merchandise at reduced prices, lowering the company's profitability.

The earnings fell short of Wall Street predictions and the Matthews, N.C.-based company issued weak outlooks for the current period and full year, adding that the holiday shopping season was tougher than expected.

Its shares dropped more than 11 percent in morning trading.

For the quarter ended Nov. 24, Family Dollar earned $80.3 million, or 69 cents per share, compared with $80.4 million, or 68 cents per share, in the year-ago period.

The recent quarter's results are based on 116.2 million outstanding shares, while those of the year-ago quarter are based on 118.6 million.

Revenue rose 13 percent to $2.42 billion from $2.15 billion, boosted by contributions from new stores. Sales of consumables jumped 19 percent, helped by higher demand for tobacco, food and health and beauty aids.

Analysts, on average, expected a profit of 75 cents per share on $2.38 billion in revenue, according to a FactSet poll.

 Family Dollar said customer response to its promotional activities was stronger than expected, boosting sales but lowering profitability. In addition, insurance costs were higher than expected, the company said.

 Revenue at stores open at least a year rose 6.6 percent, as more customers visited the company's stores and spent more, on average, per visit. The metric is a key measure of a retailer's health, because it excludes sales at stores that recently opened or closed.

Family Dollar opened 125 new stores and closed one store during the recent quarter.

 The company said increasing financial uncertainty for many of its customers resulted in a tougher-than-expected holiday sales environment, with December revenue at stores open at least a year rising about 2.5 percent.

 Family Dollar said that taking into account the December sales results, it expects its second quarter revenue at stores open at least a year to increase between 4 and 5 percent. The company also projected a profit of $1.18 to $1.28 per share for the period, while analysts expect earnings of $1.39 per share.

 For the full year, Family Dollar said it expects to earn $3.95 to $4.20 per share. Analysts expect $4.25 per share.

 Family Dollar shares dropped $7.34, or 11.5 percent, to $56.70 in morning trading. That is near its 52-week low of $53.03 set almost a year ago.