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Family Dollar Profit Slips, Dec. Outlook Disappoints

By Reuters
Published | Updated

CHICAGO – Discount retailer Family Dollar Stores Inc. (FDO) Wednesday posted a 5.5 percent decline in quarterly profit as steep energy prices hurt consumer spending, and said December sales growth may be toward the lower end of its forecast.

The retailer, which operates more than 5,900 stores, earned $51.4 million, or 32 cents per share, in the first quarter ended Nov. 26, compared with $54.4 million, or 32 cents per share, a year earlier. There were about 7.5 million fewer shares outstanding in the latest quarter.

Analysts on average expected 31 cents per share, according to Reuters Estimates.

Family Dollar has been adding coolers to many of its stores so that it can stock perishable items such as milk and eggs in the hope of drawing customers to its stores more often. It placed them in about 400 stores in the latest quarter.

Analysts said Family Dollar's sales growth suggests the strategy is paying off. Sales at stores open at least a year -- a key retail measure known as same-store sales -- rose 3 percent in the quarter, the high end of its forecast.

Total quarterly sales rose 9.5 percent to $1.51 billion.

Dollar General Corp. (DG), Family Dollar's biggest competitor in the ultra-discount segment, has also added coolers to many of its stores.

Both chains have been hurt by steep oil prices that have hit low-income shoppers particularly hard. As a result, customers have been buying the basics rather than clothing or home decor that typically carries higher profit margins.

For December, Family Dollar said same-store sales growth would likely be between 2 percent and 3 percent, the lower end of its forecast for 2 percent to 4 percent growth, if current trends continue over the next few days.

This week is expected to be busy for retailers as shoppers grab last-minute holiday gifts. Family Dollar said some of the biggest shopping days of the season were still to come.

For the second quarter, it expects same-store sales growth in the 2 percent to 3 percent range, with earnings per share between 45 cents and 50 cents.

Analysts, on average, expected 49 cents per share, according to Reuters Estimates.

The forecast for the full year ending Aug. 26 calls for same-store sales growth of 2 percent to 4 percent, and earnings between $1.30 and $1.39 per share.

Analysts, on average, expected $1.35.