Family Dollar Q2 sales down 6.1% to $2.7 billion

MATTHEWS, N.C. — Family Dollar Stores on Thursday reported that for the second quarter of fiscal year 2014 ended March 1, net sales totaled $2.7 billion, representing a decline of 6.1%. Earnings per diluted share in the second quarter of fiscal 2014 were $0.80 as compared to $1.21 in the second quarter of fiscal 2013. 

Comparable store sales for the 13-week period decreased 3.8% as a result of decreased customer transactions, partially offset by an increase in the average customer transaction value.

Consistent with the National Retail Federation Calendar, the second quarter of fiscal 2014 included 13 weeks as compared to 14 weeks in the second quarter of fiscal 2013. Family Dollar estimates that this extra week contributed approximately $189 million in sales and $0.07 of earnings per diluted share in the second quarter of fiscal 2013. The negative financial impact in the second quarter of fiscal 2014 from the adverse winter weather was at least $0.05 of earnings per diluted share, the company reported.

“Our second quarter results did not meet our expectations,” stated Howard Levine, chairman and CEO. “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,” he said. 

“Notwithstanding the macro-economic pressure, competitive environment and severe weather, we are not satisfied with our results, and we hold ourselves accountable for improving our performance,” Levine added. “To that end, we have initiated an in-depth business review to identify opportunities to strengthen our value proposition, increase operational efficiencies and improve financial performance.”

More immediately, Family Dollar has cut prices on about 1,000 basic items and will close approximately 370 underperforming stores. “Our mission is to deliver compelling, everyday values for our customers, and executing on this promise requires an unwavering commitment to being a low-cost operator," Levine said. "We are taking a number of important steps through our immediate strategic actions to improve our operational efficiency and deliver better financial returns.”

"Lastly, we intend to slow new store growth beginning in fiscal 2015 to improve our return on investment. We are confident that these steps will position Family Dollar to deliver stronger returns for our shareholders,” Levine said. Family Dollar now plans to open 350 to 400 new stores in fiscal 2015, down from approximately 525 new stores in fiscal 2014.

Gross profit for the second quarter of fiscal 2014 decreased 6.7% to $902.3 million, or 33.2% of net sales, compared to $967.1 million, or 33.4% of net sales, in the second quarter of fiscal 2013. As a percentage of sales, the impact of stronger sales of lower-margin consumables and higher markdowns was partially offset by higher markups, lower freight expense and lower inventory shrinkage.

In the first half of fiscal 2014, capital expenditures were $219.7 million compared with $409.7 million in the first half of fiscal 2013. In the first half of fiscal 2014, the company spent $76.4 million related to new stores; $54.4 million on its store renovation program; $38.4 million on existing stores; $38.1 million related to corporate and technology investments; and $12.4 million on supply chain investments.

During the first half of fiscal 2014, Family Dollar opened 244 new stores, closed 22 stores and renovated, relocated or expanded 319 stores.

For the third quarter of fiscal 2014, the company expects that comparable store sales will decline in the low-single-digit range and that earnings per diluted share will be between $0.85 and $0.95 per share, excluding approximately $0.13 per share related to restructuring charges. Including the restructuring charges, the company expects earnings per diluted share will be between $0.72 and $0.82.

For the fourth quarter of fiscal 2014, the company expects that comparable store sales will be flat to up slightly and that earnings per diluted share will be between $0.75 and $0.85, excluding approximately $0.37 related to restructuring charges. Including the restructuring charges, the company expects earnings per diluted share will be between $0.38 and $0.48.

For the 52-week year ending August 30, 2014, the company expects that earnings per diluted share will be between $3.05 and $3.25, excluding approximately $0.50 per share related to restructuring charges. Including the restructuring charges, the company expects earnings per diluted share will be between $2.55 and $2.75.

 

 

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