• Q2 earnings hit by acquisition costs
  • Margins widen to 33.3%
  • Sales grow 3%
Family Dollar has been strengthening its value proposition

Family Dollar has been strengthening its value proposition

Family Dollar Stores said it is seeing tangible benefits from the investment it has made to strengthen its value proposition, as it revealed increased second-quarter sales and margins.

In the three months to the end of February, earnings fell to US$76.7m from $90.9m a year earlier due to fees related to the company’s pending merger with Dollar Tree.

Gross margin widened slightly to 33.3%, compared to 33.2% in the prior year, as the benefit of lower markdowns was partially offset by increased sales of lower-margin consumables.

Total sales, however, grew 3% to $2.8bn, while comparable store sales edged up 0.5% as a result of an increase in the number of customer transactions, which was offset by a drop in the average customer transaction value.

"We continue to see tangible benefits from the investments we have made to strengthen our value proposition for customers," said CEO Howard Levine. "Our comparable store sales and customer traffic trends are improving, and we are beginning to see stabilisation in key categories.

"While our trends in late-February were adversely impacted by severe winter weather, our sales trends in March rebounded nicely, reflecting both improved traffic trends and the benefit of an earlier Easter. We are excited about the pending merger with Dollar Tree, and our teams are working to ensure a successful integration."

Neil Saunders, CEO of Conlumino, however, believes that although total sales at Family Dollar are in positive territory, the performance is "rather lackluster" compared to its main rivals.

He notes: "In their latest quarters, Dollar Tree and Dollar General posted growth of 10.8% and 9.9% respectively. This underlines the fact that although it is operating in a fairly robust part of the retail market, Family Dollar is far from being a smooth operator."