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Family Dollar: Net income, EPS see double-digit growth in Q2

BY DSN STAFF

MATTHEWS, N.C. — Rising gas prices and a cautious consumer environment continues to benefit the dollar store, with Family Dollar being the latest example. The company reported that net income for the second quarter of fiscal year 2012, ended Feb. 25, increased 10.7% to $136.4 million, compared with net income of $123.2 million for the second quarter of fiscal year 2011. Net income per diluted share for the quarter increased 17.3% to $1.15, compared with 98 cents for the same period last year.

Total net sales for the second quarter increased 8.6% to nearly $2.5 billion, compared with total net sales of roughly $2.3 billion in last year’s second quarter. Comparable-store sales increased 4.5%, thanks to increased customer traffic and increased average ticket. Sales were strongest in the consumables and seasonal and electronics categories, the retailer noted.

"I’m very pleased to report that we delivered our 16th consecutive quarter of double-digit earnings per share growth. Our investments to improve the shopping experience and broaden our customer appeal are gaining momentum and continue to drive higher returns for our shareholders," Family Dollar chairman and CEO Howard Levine said. "Our strategy to provide value and convenience continues to resonate in this economic environment. As we execute against our strategic plan, our store teams are working hard to expand our merchandise assortment to better meet our customer’s needs and drive further market share gains."

For the third quarter, the company expects that comparable-store sales will increase between 5% and 7%, adding that earnings per diluted share will be between $1.01 and $1.11, compared with 91 cents in the third quarter of fiscal 2011.

For the full year, the company expects that earnings per share will be between $3.55 and $3.75, compared with $3.12 in fiscal 2011.

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AAFES begins executive search for civilian CEO to lead military retailer

BY Michael Johnsen

DALLAS — The Army and Air Force Exchange Service’s leadership will undergo a historic transformation as it welcomes its first civilian director/CEO to the helm, the military retailer announced Wednesday.
 
The Defense Department has instructed AAFES to convert the Commanding General’s position to a nonmilitary director/CEO position, marking the first time in the AAFES’s 116-year history that a civilian will lead the organization. COO Mike Howard will take over as acting director/CEO as the organization’s board seeks a permanent replacement.
 
A “Change of Responsibility” ceremony that also will serve as the official retirement ceremony for the Exchange’s current commander, Maj. Gen. Bruce Casella, will be held at Exchange headquarters on Friday.

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Supreme Court hears arguments on constitutionality of individual mandate

BY Michael Johnsen

WASHINGTON — The Supreme Court on Tuesday morning heard arguments on whether the individual mandate portion of the Patient Protection and Affordable Care Act is constitutional. The final decision, expected in June, could mean a swing between 15 million and 27 million Americans, along with their prescription and other healthcare needs, entering the insurance market in 2014, according to a recent study published by the Rand Corp.

At issue is whether or not the federal government has the authority to compel commerce, in this instance healthcare insurance, in an effort to mitigate costs across all insured. Incidentally, it also will significantly reduce government cost — with the mandate the total government cost per newly insured individual is $3,659, compared with $7,468 if the individual mandate is eliminated, according to Rand.

"This is the regulation of people’s participation in the healthcare market," testified Donald Verrilli, U.S. solicitor general. Verrilli argued that because everyone eventually avails themselves of healthcare services, and because those who are not insured inflate the price of that health care for those who are, that everyone be required to carry insurance.

"It may well be that everybody eventually will need health care, but not everybody will need a heart transplant," suggested Justice Antonin Scalia, asking if whether an individual mandate would set a dangerous precedent, drawing a correlation to the food industry. "Everybody has to buy food, therefore [the government] can make people buy broccoli."

Justice Anthony Kennedy made the comparison between this individual mandate and the fact that common law does not presently compel an individual to intercede on behalf of another, even in an emergency. "Here, the government is saying that the individual must act," he said. "That changes the relationship between the government and the people in a fundamental way."

"If the effect of those uninsured people … is to raise insurance premiums right now in the aggregate," noted Justice Elana Kagan. "Those people are in commerce."

If the individual mandate is ruled constitutional, then the "40 million Americans" identified as uninsured today will be required to purchase some level of insurance. That will drive a good number of patients to medical homes and, in theory, significantly increase the demand for maintenance prescriptions and other preventative or chronic healthcare services.

If ruled unconstitutional, the number of Americans who will be apart of the marketplace in 2016 because of the Affordable Care Act will be reduced by almost 30 million, according to the Rand study. That study determined that by 2016 81.3% of nonelderly patients would have insurance if the Affordable Care Act were not implemented; 86.6% would have insurance if the law was implemented without the individual mandate; and 91.1% would have coverage with the passing of the ACA and the enforcement of the individual mandate. With the insurance mandate, 50.1 million people would be covered through Medicaid and 24.5 million would be uninsured by 2016. Without the mandate, 37 million would be covered through Medicaid and 52.2 million would be uninsured.

The individual mandate supports another aspect of the Affordable Care Act — that insurers not deny coverage to those with preexisting conditions — by enlarging the pool of covered to include young and healthy patients who won’t incur as many healthcare costs. "These people are essentially the golden goose that pay for the lower premium," commented Paul Clement, lead attorney for Florida and 25 other states who are challenging the mandate.

Slightly more than half (53%) of Americans expect the Supreme Court to rule that the individual mandate is unconstitutional; almost as many, 51%, think the Supreme Court should rule that way, according to a Kaiser Family Foundation poll conducted Feb. 29 through March 5. If the mandate is struck down, 60% of Americans will want lawmakers to continue working on improving access to health care.

What is not expected to be impacted by the Supreme Court ruling is the market-driven push toward lower-cost consumer-directed health care — retail clinics, over-the-counter medicines, Rx-to-OTC switch, private industry incentives for wellness and prevention or workplace penalties for unhealthy lifestyles. "Healthcare is reforming with or without the legislation," stated Steven Burrill, CEO of Burrill & Co., a financial services firm focused on the life sciences. "The most dramatic changes to health care are under way, and they are being driven not by legislation, but by patients, providers, payers and technology," he noted. "That’s coming as the convergence of information technology, wireless connectivity, and low-cost monitors will provide us with real-time information about our own health and wellness, and put individuals in unprecedented control of their own health."


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