Family Dollar Q2 Profit Down; Sees Q3, FY14 Adj. EPS Below View - Quick Facts

(RTTNews) - Discount retailer Family Dollar Stores Inc. (FDO) said that its net income for the second quarter of fiscal 2014 declined to $90.9 million from $140.1 million in the second quarter of fiscal 2013. Quarterly earnings per share dropped to $0.80 from $1.21 in the prior year. Analysts polled by Thomson Reuters expected the company to report earnings of $0.90 per share for the second-quarter. Analysts' estimates typically exclude special items.

Consistent with the National Retail Federation Calendar, the second quarter of fiscal 2014 included 13 weeks as compared to 14 weeks in the second quarter of fiscal 2013.

Excluding the impact of the extra week, net income in the second quarter of fiscal 2013 would have been $132.0 million.

Net sales for the second quarter decreased 6.1% to $2.7 billion from $2.9 billion last year. Twenty six analysts estimated revenues of $2.77 billion for the quarter.

The Company estimates that this extra week contributed approximately $189 million in sales in fiscal 2013. Excluding the impact of the extra week, the Company estimates that sales in the second quarter of fiscal 2014 would have increased 0.4% compared to the second quarter of fiscal 2013. Sales in the second quarter of fiscal 2014 were strongest in the Consumables category, driven primarily by strong growth in refrigerated and frozen food and tobacco.

Comparable store sales for the 13-week period ended March 1, 2014, decreased 3.8% as a result of decreased customer transactions, partially offset by an increase in the average customer transaction value.

The company said it is executing a series of immediate strategic actions, which include reducing corporate overhead and re-aligning key organizational functions to improve execution and reinforce the Company's commitment to being an efficient, low-cost retailer; Closing approximately 370 underperforming stores in the second half of fiscal 2014.

The company expects to record an estimated $85 million to $95 million restructuring charge in the second half of fiscal 2014 related to the workforce reductions and store closures. This charge was not included in the earnings outlook previously provided by the Company.

The company estimates that the impact from the workforce reductions and store closures will deliver $40 million to $45 million of annualized operating profit benefit, beginning in the third quarter of fiscal 2014. These savings are included in the Company's fiscal 2014 earnings outlook.

For the third quarter of fiscal 2014, the company expects that comparable store sales will decline in the low-single-digit range and that earnings per share will be between $0.85 and $0.95 per share, excluding approximately $0.13 per share related to restructuring charges. Analysts project third-quarter earnings of $0.98 per share. Including the restructuring charges, the Company expects earnings per share will be between $0.72 and $0.82.

For the fourth quarter of fiscal 2014, the Company expects that comparable store sales will be flat to up slightly and that earnings per diluted share will be between $0.75 and $0.85, excluding approximately $0.37 related to restructuring charges. Including the restructuring charges, the Company expects earnings per diluted share will be between $0.38 and $0.48.

For the 52-week year ending August 30, 2014, the company expects that earnings per share will be between $3.05 and $3.25, excluding approximately $0.50 per share related to restructuring charges. Analysts project annual earnings per share of $3.38. Including the restructuring charges, the company expects earnings per diluted share will be between $2.55 and $2.75. While announcing the first-quarter result, the company expected earnings to be in the range of $3.25 to $3.55 per share for fiscal 2014.

The company's outlook for fiscal 2014 is based on a low-single digit increase in net sales, excluding the impact of the extra week in fiscal 2013; a low-single digit decline in comparable store sales.