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Press release from Business Wire

Family Dollar Reports Record Second Quarter Earnings

<ul> <li class='bwlistitemmarginbottom'> <i>Earnings per diluted share increases 35.0% to $0.81</i> </li> <li class='bwlistitemmarginbottom'> <i>Net income increases 33.4%</i> </li> <li class='bwlistitemmarginbottom'> <i>Operating profit margin increases 195 basis points</i> </li> <li class='bwlistitemmarginbottom'> <i>Management increases full year guidance</i> </li> </ul>

Wednesday, April 07, 2010

Family Dollar Reports Record Second Quarter Earnings05:55 EDT Wednesday, April 07, 2010 MATTHEWS, N.C. (Business Wire) -- Family Dollar Stores, Inc. (NYSE: FDO) today reported that net income per diluted share for the second quarter of fiscal 2010 ended February 27, 2010, increased 35.0% to $0.81 compared with $0.60 for the second quarter of fiscal 2009 ended February 28, 2009. Net income for the quarter increased 33.4% to $112.2 million compared with net income of $84.1 million for the second quarter of fiscal 2009. “These strong results reflect our efforts to provide our customers with more value, more convenience and a better shopping experience,” said Howard R. Levine, Chairman and Chief Executive Officer. “We have invested significantly to improve processes, build merchandising capabilities and stabilize our workforce, and these investments are clearly delivering results. As we increase our focus on accelerating revenue growth, I am confident that our continued efforts to broaden the appeal of our assortment, strengthen our customer communications and improve the in-store shopping experience will result in expanded market share and strong financial returns.” As previously reported, sales for the second quarter of fiscal 2010 were approximately $2.09billion, or 4.9% above sales of approximately $1.99 billion for the second quarter of fiscal 2009. Comparable store sales increased 3.6%. The increase in comparable store sales was a result of increased customer traffic, as measured by the number of register transactions, and an increase in the value of the average customer transaction. Sales were strong in the Seasonal and Electronics, Home Products and Consumables categories. Sales of Apparel and Accessories were approximately flat. The gross profit margin, as a percentage of sales, was 35.4% in the second quarter of fiscal 2010 compared to 33.7% in the second quarter of fiscal 2009. The improvement in gross profit, as a percentage of sales, was a result of higher purchase mark-ups and reductions in markdown expenses, freight expenses and inventory shrinkage. Selling, general and administrative (SG&A) expenses, as a percentage of sales, were 26.8% in the second quarter of fiscal 2010 compared with 27.0% in the second quarter of fiscal 2009. The decrease in SG&A expenses, as a percentage of sales, was primarily a result of lower utility costs and lower insurance expense which more than offset higher expenses related to expanded store operating hours and certain store maintenance and repair costs. The Company's inventories at February 27, 2010, were $935.3 million, or 9.6% less than inventories of $1,035.2 million at February 28, 2009. In the first half of fiscal 2010, capital expenditures were $82.9 million compared with $61.8 million in the first half of fiscal 2009. During the first half of fiscal 2010, the Company opened 86 new stores and closed 52 stores. During the first half of fiscal 2010, the Company repurchased approximately 4.1 million shares of its common stock. As of February 27, 2010, the Company had authorization to purchase up to an additional $296.0 million of its common stock. Outlook “I am pleased to report that the sales momentum we saw in the second quarter has continued through March,” said Levine. “Reflecting favorable weather trends and the impact of the Easter shift, comparable store sales for the March reporting period increased approximately 11%.” For the third quarter, the Company expects that comparable sales for the quarter will increase 6% to 8% and that earnings per share will be between $0.71 and $0.76 compared with $0.62 in the third quarter of fiscal 2009. For the full year, the Company expects that earnings per share will be between $2.48 and $2.58 compared with $2.07 in fiscal 2009. Cautionary Statements Certain statements contained in this press release are “forward-looking statements” that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements address certain plans, activities or events which the Company expects will or may occur in the future and relate to, among other things, the state of the economy, the Company's investment plans, net sales, comparable store sales, cost of sales, SG&A expenses, and earnings per diluted share. Various risks, uncertainties and other factors could cause actual results to differ materially from those expressed in any forward-looking statement. Consequently, all of the forward-looking statements made by the Company in this and in other documents or statements are qualified by factors, risks and uncertainties, including, but not limited to, those set forth under the headings titled “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” in the Company's most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission up to the date of this release. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company does not undertake to update or revise these forward-looking statements even if experience or future changes make it clear that projected results expressed or implied in such statements will not be realized, except as may be required by law. Second Quarter Earnings Conference Call Information The Company plans to host a conference call with investors today, April 7, 2010, at 10:00 A.M. ET to discuss the results. If you wish to participate, please call (800) 857-5160 for domestic US calls and (312) 470-7174 for international calls at least 10 minutes before the call is scheduled to begin. The passcode for the conference call is FAMILY DOLLAR. There will also be a live webcast of the conference call that can be accessed at the following link: http://www.familydollar.com/investors.aspx?p=irhome. A replay of the webcast will be available at the same address noted above after 2:00 P.M. ET, April 7, 2010. About Family Dollar Beginning with one store in 1959 in Charlotte, North Carolina, the Company currently operates more than 6,600 stores in 44 states. Family Dollar Stores, Inc., a Fortune 500 company, is based in Matthews, North Carolina, just outside of Charlotte and is a publicly held company with common stock traded on the New York Stock Exchange under the symbol FDO. For more information, please visit www.familydollar.com. FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)         For the Second Quarter Ended (in thousands, except per share amounts) February 27, 2010   % of Net Sales February 28, 2009   % of Net Sales   Net sales $ 2,090,230 100.00 % $ 1,992,260 100.00 %   Cost of sales   1,349,399 64.56 %   1,320,956 66.30 %   Gross margin 740,831 35.44 % 671,304 33.70 %   Selling, general and administrative expenses   559,480 26.77 %   537,218 26.97 %   Operating profit 181,351 8.68 % 134,086 6.73 %   Interest income 269 0.01 % 1,564 0.08 %   Interest expense   3,368 0.16 %   3,345 0.17 %   Income before income taxes 178,252 8.53 % 132,305 6.64 %   Income taxes   66,043 3.16 %   48,165 2.42 %   Net income $ 112,209 5.37 % $ 84,140 4.22 %   Net income per common share - basic $ 0.82 $ 0.60 Weighted average shares - basic 137,480 139,996   Net income per common share - diluted $ 0.81 $ 0.60 Weighted average shares - diluted 138,142 140,456   Dividends declared per common share $ 0.155 $ 0.135 FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited)         For the First Half Ended (in thousands, except per share amounts) February 27, 2010 % of Net Sales February 28, 2009 % of Net Sales   Net sales $ 3,913,136 100.00 % $ 3,746,093 100.00 %   Cost of sales   2,514,083 64.25 %   2,460,336 65.68 %   Gross margin 1,399,053 35.75 % 1,285,757 34.32 %   Selling, general and administrative expenses   1,108,031 28.32 %   1,059,267 28.28 %   Operating profit 291,022 7.44 % 226,490 6.05 %   Interest income 664 0.02 % 5,163 0.14 %   Interest expense   6,703 0.17 %   6,562 0.18 %   Income before income taxes 284,983 7.28 % 225,091 6.01 %   Income taxes   105,153 2.69 %   81,662 2.18 %   Net income $ 179,830 4.60 % $ 143,429 3.83 %   Net income per common share - basic $ 1.30 $ 1.03 Weighted average shares - basic 138,083 139,907   Net income per common share - diluted $ 1.30 $ 1.02 Weighted average shares - diluted 138,707 140,346   Dividends declared per common share $ 0.290 $ 0.260 FAMILY DOLLAR STORES, INC., AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Unaudited)       For the First Half EndedFebruary 27,February 28,(in thousands, except per share and share amounts)20102009Assets Current assets: Cash and cash equivalents $ 502,583 $ 299,289 Investment securities 8,197 — Merchandise inventories 935,305 1,035,196 Deferred income taxes 71,666 96,382 Prepayments and other current assets   58,299   56,973 Total current assets 1,576,050 1,487,840   Property and equipment, net 1,053,622 1,049,923 Investment securities 192,851 207,842 Other assets   28,140   23,678   Total assets$2,850,663$2,769,283   Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 584,944 $ 538,902 Accrued liabilities 478,647 506,893 Income taxes   20,423   28,239 Total current liabilities 1,084,014 1,074,034   Long-term debt 250,000 250,000 Deferred income taxes 47,684 45,180 Income taxes 39,940 32,328 Commitments and contingencies   Shareholders' Equity: Preferred stock, $1 par; authorized and unissued 500,000 shares   Common stock, $.10 par; authorized 600,000,000 shares 14,606 14,454 Capital in excess of par 224,671 178,579 Retained earnings 1,528,083 1,277,675 Accumulated other comprehensive loss   (8,995)   (10,251) 1,758,365 1,460,457 Less: common stock held in treasury, at cost   329,340   92,716 Total shareholders' equity   1,429,025   1,367,741   Total liabilities and shareholders' equity$2,850,663$2,769,283FAMILY DOLLAR STORES, INC., AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)           For the First Half Ended(in thousands)February 27, 2010February 28, 2009 Cash flows from operating activities: Net income $ 179,830 $ 143,429 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 84,368 77,736 Deferred income taxes 14,139 (11,134 ) Excess tax benefits from stock-based compensation (435 ) (112 ) Stock-based compensation 5,966 6,087 Loss on disposition of property and equipment, including impairment 4,875 5,955 Changes in operating assets and liabilities: Merchandise inventories 58,492 (2,511 ) Income tax refund receivable 8,618 7,007 Prepayments and other current assets 869 1,209 Other assets (4,199 ) 650 Accounts payable and accrued liabilities (56,646 ) 4,080 Income taxes   20,712     21,021     316,589     253,417     Cash flows from investing activities: Purchases of investment securities (37,006 ) — Sales of investment securities 5,300 5,600 Capital expenditures (82,851 ) (61,788 ) Proceeds from dispositions of property and equipment   616     57     (113,941 )   (56,131 )   Cash flows from financing activities: Payment of debt issuance costs (651 ) (624 ) Repurchases of common stock (166,002 ) — Changes in cash overdrafts 55,792 (27,256 ) Proceeds from exercise of employee stock options 8,890 6,222 Excess tax benefits from stock-based compensation 435 112 Payment of dividends   (37,419 )   (34,953 )   (138,955 )   (56,499 )   Net change in cash and cash equivalents 63,693 140,787 Cash and cash equivalents at beginning of period   438,890     158,502   Cash and cash equivalents at end of period $ 502,583   $ 299,289   FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES Selected Additional Information       NET SALES BY CATEGORY: For the Second Quarter Ended February 27, February 28, (in thousands) 2010 2009 % Change   Consumables $ 1,271,121 $ 1,209,453 5.1 % Home products 318,910 300,602 6.1 % Apparel and accessories 214,358 214,882 -0.2 % Seasonal and electronics   285,841     267,323   6.9 % TOTAL $ 2,090,230 $ 1,992,260 4.9 %   For the First Half Ended February 27, February 28, (in thousands) 2010 2009 % Change   Consumables $ 2,492,978 $ 2,364,508 5.4 % Home products 554,207 534,194 3.7 % Apparel and accessories 396,657 400,981 -1.1 % Seasonal and electronics   469,294     446,410   5.1 % TOTAL $ 3,913,136 $ 3,746,093 4.5 %     STORES IN OPERATION: For the First half Ended February 27, February 28, 2010 2009 Beginning Store Count 6,655 6,571 New Store Openings 86 122 Store Closings   (52 )   (50 ) Ending Store Count 6,689 6,643 Total Square Footage (000s) 56,983 56,511 Total Selling Square Footage (000s) 47,480 47,016