Family Dollar Stores Inc. (NYSE: FDO) is scheduled to release its fiscal second-quarter earnings before the opening bell on Wednesday, March 30, 2011. Analysts, on average, expect the company to report earnings of $0.97 per share on revenue of $2.27 billion. In the year ago quarter, the company reported earnings of $0.81 per share on revenue of $2.09 billion.
Family Dollar Stores, Inc. operates a chain of self-service retail discount stores primarily for low and middle income consumers in the United States. As of February 26, 2011, the company had 6,888 stores, including 61 new stores opened in the second quarter. The company sells most of items for $10 or less and caters to consumers with household incomes of $40,000 and below.
In the preceding first quarter, the Charlotte, North Carolina-based company's net income was $74.32 million or $0.58 per share, compared to $67.62 million or $0.49 per share in the year-ago period. Revenue grew 9.5% to $2 billion from $1.82 billion a year ago. Analysts, on average, expect the company to report earnings of $0.61 per share on revenue of $1.98 billion.
Recently, the company reported an 8.3 percent rise in its sales for the second quarter as comparable store sales increased 5.1 percent. The company said that sales in the consumable and seasonal categories were strongest during the quarter. While January sales were negatively impacted by winter storms, February sales benefited from early spring-like weather, the company noted. The company also increased its quarterly cash dividend by 16.1 percent. Commenting on the sales, Howard Levine, chairman and CEO of Family Dollar, said, "Family Dollar continues to execute well against our strategic plan to accelerate revenue growth, expand operating margins and optimize our capital structure." The company also lifted its second quarter earnings guidance. Family Dollar said that it now expects second-quarter earnings in the range of $0.97 to $0.98 per share, compared with $0.92 to $0.97 per share estimated earlier.
The discount retailer has benefited from increased traffic and a higher average ticket as consumers continue to be price conscious in the wake of the economic recovery. Moreover, effective price management, cost containment, tighter inventory control, private label offering and expanded operating hours have helped drive sales and margin trends. Also, the company's strategic initiatives to improve merchandising and store operations have helped grow the top and bottom lines. Family Dollar's point-of-sale technology and store realignment initiatives are helping to drive traffic. In order to enhance its market share, Family Dollar intends to focus on both consumable and discretionary categories. In fiscal 2011, the company expects to continue to enhance and develop new private brand programs with increased focus on consumable categories.
Recently, the company rejected the unsolicited, conditional takeover proposal from Trian Group, stating that the sale is not in the best interest of the shareholders and it substantially undervalues the company. As a strategic step to discourage Trian's potential move to take the offer to the shareholders directly, the Board plans to adopt a 'poison pill', by way of shareholder rights plan. On February 15, the company had confirmed the receipt of an unsolicited conditional proposal from activist investor Nelson Peltz-controlled Trian Fund Management, L.P at a price in the range of $55 to $60 per share in cash.
The company's stock currently trades at a forward P/E (fye Aug 28, 2012) of 14.42 and PEG Ratio (5 yr expected) of 1.15. In terms of stock performance, Family Dollar shares have gained nearly 41% over the past year.
Full Disclosure: None.
