231-922-9460 | Google +

Thursday, January 15, 2009

Family Dollar Raises Profit Forecast

As posted by: Wall Street Journal

Family Dollar Stores Inc. raised its outlook for the fiscal year after posting a better-than-expected 14% gain in fiscal first-quarter net income.

The Matthews, N.C.-based discounter now sees earnings for the full year of between $1.63 and $1.81 a share, up from October's projection of $1.58 to $1.78. It raised its estimate of annual revenue by one percentage point, to a gain of between 4% and 6%.

For the current quarter, Family Dollar forecast earnings of between 48 cents and 52 cents, with same-store sales up by 3% to 5%. Analysts surveyed by Thomson Reuters expect 47 cents.

Family Dollar and other deep discounters have been benefiting in recent months from the economic downturn as shoppers trade down and search for bargain-priced basics. Family Dollar has been reporting consistent growth, with traffic and market share increasing in part due to an expanded emphasis on food sales. That has helped push up its shares 41% in the past year.

For the quarter ended Nov. 29, Family Dollar reported net income of $59.3 million, or 42 cents a share, up from $51.9 million, or 37 cents a share, a year ago.

Gross margin, or profit after deducting the cost of goods, widened to 35% from 34.2% on lower seasonal markdowns and freight costs. The company also said less shoplifting and higher prices contributed to the gain.

Family Dollar last month said the quarter's sales rose 4.2% to $1.75 billion, with same-store sales up by half that amount. Consumable sales increased 13%, driven primarily by food sales. Its stock was the top performer among S&P 500 stocks last year with a 35.6% gain.

Some analysts applauded Family Dollar's efforts, with Wedbush Morgan Securities saying the company has improved "the assortment and quality of merchandise" and store appearance. But others say the 6,600-store deep discounter faces more competition and margin pressure as it adds consumable goods.