Tightfisted Consumers Open Wallets At Family Dollar
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Retail & Services | 
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7/07/10Retailer beats third-quarter estimates despite rocky economy, but trims guidance.
Value chains like Family Dollar, Dollar General and 99 Cents Only Stores are seeing the benefits of offering low-cost products during tough economic times when recession-weary consumers are cautious about dishing out cash.
North Carolina-based Family Dollar Stores ( FDO – news – people ) reported earnings of 77 cents per share for the three-month period ended May 29, compared with 62 cents in the corresponding period a year ago; it was a penny ahead of the consensus analyst estimate. Net income for the quarter climbed 19% to $104.4 million, from $87.7 million in the year ago period. Third-quarter sales fell to $2 billion, in line with estimates. Reductions in markdown expenses and lighter inventory padded the retailer’s to gross profit margins, which expanded to 36.6% from 36.2%.
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“People are looking for any deals they can find these days,” says Phoenix Partners analyst Robert Samuels. Value stores are appealing to consumers, and shoppers are more likely to open their wallets where they can stretch a buck.
“We continue to deliver greater value for our customers while improving their shopping experience in our stores. As a result, more and more consumers are finding the savings they need at Family Dollar,” said Chairman and CEO Howard R. Levine. “Our revenue growth has accelerated nicely, and I am pleased to report our ninth-consecutive-quarter of double-digit earnings per share growth.”
The dollar store chain issued EPS guidance for the fourth quarter between 46 cents and 51 cents, slightly under analysts’ forecast of 53 cents. The company expects that comparable store sales will increase 5% to 7%.
While analysts expect the company to report full-year earnings of $2.59 per share, Family Dollar narrowed its fiscal 2010 guidance to between $2.53 and $2.58 per share, from its prior forecast of $2.48 to $2.58.
