Family Dollar Stores (FDO) Misses Q1 EPS by 18c

Family Dollar Stores (NYSE: FDO) reported Q1 EPS of $0.44, $0.18 worse than the analyst estimate of $0.62. Revenue for the quarter came in at $2.56 billion versus the consensus estimate of $2.57 billion.

• First Quarter Comparable Store Sales Decrease 0.4%
• December Comparable Store Sales Increase 1.2%

The Company’s merchandise inventories at November 29, 2014, increased 4.1% to $1.71 billion compared with $1.65 billion at November 30, 2013. Average inventory per store at the end of the first quarter of fiscal 2015 was approximately 3% higher than the average inventory per store at the end of the first quarter of fiscal 2014. The increase in average inventory per store was primarily the result of the Company’s expanded assortment of tobacco and food.

“As expected, the first quarter of fiscal 2015 was very challenging, as we continued our transition from a very promotional merchandising strategy to a more everyday low price strategy. During the quarter, gross margin continued to be pressured by the impact of our pricing investments, as well as strong growth of lower-margin consumable categories, including food and tobacco. Our team did a good job of controlling expenses; however, ongoing topline challenges and continued margin pressures impacted our net profitability,” said Howard R. Levine, Chairman and CEO. “As we look to the rest of fiscal 2015, we are focused on driving more profitable sales growth, and the second quarter is off to a solid start. Comparable store sales in December increased 1.2%, with fewer in-season promotional markdowns than last year and growth in customer traffic.”

“In fiscal 2014, we implemented a number of initiatives designed to drive sales and reposition our cost structure. We invested $50 million, on an annualized basis, to reduce prices in key areas; we closed 377 underperforming stores; and we took actions to reduce corporate overhead and re-align key organizational functions to reduce our infrastructure costs. While we are still in the early stages of our turnaround plan, we are beginning to see some stabilization in key areas, and we continue to believe that the strategic actions we have taken will position the Company for better long-term performance,” continued Levine.

For earnings history and earnings-related data on Family Dollar Stores (FDO) click here.

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