Family Dollar Profit Rises But Miss Estimates

(RTTNews) - Family Dollar Stores Inc (FDO), which is being acquired by Dollar Tree, Thursday reported a plunge in fourth-quarter profit as the discount retailer incurred restructuring and other charges that offset a near 5 percent climb in sales. Quarterly earnings missed Wall Street estimates, but sales came in above expectations.

Results reflect tough business conditions, said CEO Howard Levine, adding that the company is restructuring itself to spur growth.

Levine said that the company is poised for growth in 2015, but that the first quarter will be the most challenging in that fiscal period.

Family Dollar, based in Matthews, North Carolina, posted quarterly net income of $34.5 million or $0.30 per share, compared with $102 million or $0.88 per share last year.

Results for the recent quarter included $0.43 per share of restructuring charges and fees related to its pending merger with Dollar Tree.

Excluding items, adjusted earnings for the quarter were $0.73 per share, compared with $0.86 per share a year ago.

On average, 24 analysts polled by Thomson Reuters expected earnings of $0.77 per share for the quarter. Analysts' estimates typically exclude special items.

Sales for the fourth quarter rose 4.5 percent to $2.6 billion from $2.5 billion in the prior year. Twenty-five analysts had a consensus sales estimate of $2.58 billion for the quarter.

Same-store sales for the quarter increased 0.3 percent due to an increase in the average customer transaction value, partly offset by fewer transactions.

Sales were strongest in the Consumables and Seasonal and Electronics categories, the company said.

Gross margin for the quarter slid to 32.95 percent from 34.71 percent a year ago.

During the quarter, the company implemented a series of restructuring initiatives, including the closing of 375 under-performing stores. As of August 2014, the company operated 8,042 stores.

The company expects to open 375 new stores, close 40 stores, and renovate, relocate or expand 775 stores in fiscal 2015.

Family Dollar did not provide financial guidance for fiscal year 2015 in light of its pending merger with Dollar Tree Inc (DLTR).

Family Dollar has been in the midst of a takeover struggle between Dollar Tree and Dollar General, whose offer it has repeatedly spurned.

In July, Family Dollar agreed to be acquired by Dollar Tree for $74.50 per share in a cash and stock deal valued at $9.2 billion. In August, Dollar General made a superior all-cash proposal to buy Family Dollar for $78.50 per share or $9.7 billion to thwart the Dollar Tree bid. But Family Dollar rejected the bid, citing antitrust regulatory considerations, and reaffirmed its merger deal with Dollar Tree.

Dollar General sweetened its offer by $1.50 to $80.00 per share, and also raised the number of stores it was willing to divest if ordered by the Federal Trade Commission or FTC.

Family Dollar stock closed Thursday at $77.75, up $0.04 or 0.05%, on a volume of 0.65 million shares on the NYSE. In after hours, the stock dropped $0.50 or 0.64%.