US: Family Dollar Q3 profit slides, beats estimates
- Net profit down to $120.9m
- Net sales grow 9%
- Comparable store sales rose 2.9%
US discount retailer Family Dollar Stores has recorded a drop in third-quarter earnings but said sales and profits came in at the upper end of its guidance.
In the three month period, net income dropped to US$120.9m from earnings of $124.5m last year.
Sales, however, increased 9% to $2.57bn, while comparable sales were up 2.9%. The increase was a result of an increase in the average customer transaction value and higher customer traffic.
Apparel and accessories sales, meanwhile, fell 8.9% $206.5m from $226.8m the same period the prior year.
CEO Howard Levine said discretionary sales "remained challenged" as customers were "forced to make spending choices between basic needs and wants".
Looking forward, he added: "Consistent with market trends, we expect that our customers will continue to face financial headwinds."
The retailer narrowed its full-year earnings forecast, raising the low end of the range and cutting the high end of the range. It now expects diluted earnings per share of between $3.77 and $3.82, compared to $3.58 in fiscal 2012.
|Family Dollar Reports Third Quarter Results|
MATTHEWS, N.C.--(BUSINESS WIRE)--Jul. 10, 2013-- Family Dollar Stores, Inc. (NYSE: FDO) today reported that for the third quarter of fiscal 2013 ended June 1, 2013, net sales increased 9.0% to $2.57 billion and net income per diluted share for the quarter was $1.05 as compared to $1.06 in the third quarter of fiscal 2012.
“This morning we reported sales and earnings results for the third quarter that were at the upper-end of our guidance,” said Howard R. Levine, Chairman and CEO. “Our consumables sales remained strong and we continued to gain market share. However, our discretionary sales remained challenged as our customers have been forced to make spending choices between basic needs and wants. Consistent with market trends, we expect that our customers will continue to face financial headwinds. We are adapting accordingly, and we are focused on stabilizing gross margin, controlling expenses, improving inventory productivity, and driving greater operational efficiencies. I am confident that we remain well positioned for long-term profitable growth.”
Fiscal 2013 Third Quarter Results
Net sales for the third quarter ended June 1, 2013, increased 9.0% to $2.57 billion from $2.36 billion in the third quarter of fiscal 2012 ended May 26, 2012. Comparable store sales in the quarter increased 2.9%. The increase in comparable store sales was a result of an increase in the average customer transaction value and higher customer traffic. Sales were strongest in the Consumables category, which increased 14.8% during the quarter, driven primarily by strong growth in food, health and beauty aids, and tobacco.
Gross profit for the quarter increased 5.6% to $892.5 million, or 34.7% of net sales, compared to $845.3 million, or 35.8% of net sales, in the third quarter of fiscal 2012. As a percentage of sales, the impact of stronger sales of lower-margin consumables, increased inventory shrinkage and higher markdowns was partially offset by higher purchase markups and lower freight expense.
Selling, general and administrative expenses, as a percentage of net sales, were 27.4% in the quarter compared to 27.6% in the third quarter of fiscal 2012. As a percentage of net sales, lower advertising and distribution center costs were offset by higher store occupancy costs and store payroll.
The effective income tax rate in the quarter was 36.2% as compared to 35.8% in the third quarter of fiscal 2012. The increase in the effective tax rate was due primarily to changes in uncertain tax positions, partially offset by higher federal tax credits and foreign tax benefits associated with the Company’s global sourcing efforts.
Net income for the quarter was $120.9 million compared to net income of $124.5 million for the third quarter of fiscal 2012.
The Company’s merchandise inventories at June 1, 2013, were $1.47 billion compared with $1.39 billion at May 26, 2012. Average inventory per store at the end of the quarter was 1.0% lower than the average inventory per store at the end of the third quarter of fiscal 2012.
In the first three quarters of fiscal 2013, capital expenditures were $599.7 million compared with $391.4 million in the first three quarters of fiscal 2012. The growth in capital expenditures was primarily due to increased investments in new stores. During the first three quarters of fiscal 2013, the Company spent $242.9 million related to its Fee Development Program, compared to$69.3 million in the first three quarters of fiscal 2012.
During the quarter, the Company opened 129 new stores, closed 3 stores, and renovated, relocated or expanded 228 stores.
In the fourth quarter, the Company expects to anniversary many of the sales-driving initiatives that were launched in the fourth quarter of fiscal 2012. Additionally, the Company believes that sales in more discretionary categories will continue to be pressured. Based on June sales trends, the Company expects that comparable store sales in the fourth quarter of fiscal 2013 will increase around 2%. The company also expects that gross margin pressure and SG&A leverage in the quarter will be minimal. The Company believes that earnings per diluted share will be between $0.82 and $0.87 per share compared with$0.69 per share in the fourth quarter of fiscal 2012. Included in the results for the fourth quarter of fiscal 2012 was a litigation charge of $0.06 per diluted share.
The Company now expects that diluted earnings per share in fiscal 2013 will be between $3.77 and $3.82 compared to $3.58 in fiscal 2012. The Company's outlook for fiscal 2013 is based on the following assumptions which may or may not prove valid:
Original source: http://corporate.familydollar.com/pages/investors.aspx
Jeffrey Macak, executive vice president of supply chain at Family Dollar, has resigned from the discount retailer for personal reasons, after just two months in the role....
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