Family Dollar Stores Inc. (FDO), the operator of self-service retail discount store chains, recently announced the appointment of the founding partner and chief investment officer of Trian Partners, Edward P. Garden, as a director.
The announcement followed the agreement wherein Trian agreed to limit its stake to 9.9% in Family Dollar. Further, Family Dollar’s board will be now expanded to eleven members with the addition of the new Director.
Earlier in March, the retailer refused a voluntary offer from Trian Group for the buyout as it felt that the bid significantly underrated the company. Trian Group, the largest shareholder of the company with approximately 8.0% stake, had offered $55.0 to $60.0 per share or approximately $7.0 billion to Family Dollar.
Family Dollar Stores, which operates a chain of retail discount stores in the United States, faces stiff competition from Wal-Mart Stores Inc. (WMT) and Dollar General Corporation (DG). It offers general merchandise in four categories: consumables, home products, apparel and accessories, and seasonal and electronics. Family Dollar at present operates a chain of 7,000 general merchandise retail discount stores across 44 states.
Family Dollar’s strategic initiatives to enhance the merchandising, marketing, and store operations have resulted in persistent growth in both the top and bottom lines. In order to boost the market share, Family Dollar intends to focus on both consumable and discretionary categories
Further, the company has effective price and inventory management, cost control, private label offering, expanded operating hours to drive sales and margin trends.
Moreover, the company’s point-of-sale technology (credit card and food stamp acceptance) and store realignment initiatives better positions it to increase traffic, meet customer’s demand and enrich its in-store shopping experience.
However, the company’s customers remain sensitive to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels, and high household debt levels, which may negatively impact their discretionary spending, and in turn, the company’s growth and profitability.
At present, we have a long-term “Neutral” recommendation on the stock. Moreover, Family Dollar holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.
