Family Dollar Stores, Inc. (FDO) recently reported better-than-expected first-quarter 2010 results with a low single-digit growth in the top-line, but a surprise double-digit growth in the bottom-line buoyed by effective cost and inventory management.
Family Dollar’s quarterly earnings of 49 cents a share surpassed the Zacks Consensus Estimate of 47 cents, and climbed 16.7% from 42 cents delivered in the prior-year quarter. Management now expects second-quarter 2010 earnings between 65 cents and 70 cents a share.
Family Dollar’s strategic initiatives to improve merchandising and store operations have helped grow the top and bottom lines. The company’s shares rose $2.37, or 8.6%, to $29.86 in pre-market trading.
The operator of self-service retail discount store chains posted a 3.9% year-on-year increase in revenue to $1,822.9 million due to a rise in sales registered across consumables categories (up 5.8%), seasonal and electronics categories (up 2.4%) and home products (up 0.7%), partially offset by lower sales experienced in apparel and accessories (down 2%).
The company’s point-of-sale technology and store realignment initiatives better positions it to drive traffic, meet customer-oriented demand and improve in-store shopping experience. Cash-strapped consumers are now prioritizing their purchases and looking for low-priced options. The company trades in merchandise generally priced in the range from under $1 to $10.
Comparable-stores sales climbed 2.4% in the quarter under review after inching up 1% in fourth-quarter 2009 but were below its estimate growth of 3% to 5%. In the year-ago quarter, comps were up 2.1%. However, comps in the second quarter of 2010 are faring better with sales up 4% in December. Management predicts second quarter 2010 comps to increase by 2%-4%. Average transaction value for the quarter was flat.
For fiscal year 2010, Family Dollar expects net sales to rise by 4%-6%, and earnings in the range of $2.15 to $2.35 per share. Management expects comps to increase 3%-5% in the second half of fiscal year 2010.
The company ended first-quarter 2010 with cash and cash equivalents of $366.4 million, and shareholders’ equity of $1,473.7 million. Capital expenditures for the quarter were $39.1 million.
During the first-quarter of 2010, Family Dollar opened 43 stores and closed 33 stores. The company currently operates a chain of 6,665 stores in 44 states.
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