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Press release from Business Wire

Family Dollar Reports Record Third Quarter Earnings

<ul> <li class='bwlistitemmarginbottom'> <i>Earnings per diluted share increase 24.2% to $0.77</i> </li> <li class='bwlistitemmarginbottom'> <i>Net income increases 19.0%</i> </li> <li class='bwlistitemmarginbottom'> <i>Operating profit margin increases 98 basis points</i> </li> </ul> <p> </p>

Wednesday, July 07, 2010

Family Dollar Reports Record Third Quarter Earnings05:50 EDT Wednesday, July 07, 2010 MATTHEWS, N.C. (Business Wire) -- Family Dollar Stores, Inc. (NYSE: FDO) today reported that net income per diluted share for the third quarter of fiscal 2010 ended May 29, 2010, increased 24.2% to $0.77 compared with $0.62 for the third quarter of fiscal 2009 ended May 30, 2009. Net income for the quarter increased 19.0% to $104.4 million compared with net income of $87.7 million for the third quarter of fiscal 2009. “We continue to deliver greater value for our customers while improving their shopping experience in our stores. As a result, more and more consumers are finding the savings they need at Family Dollar,” said Howard R. Levine, Chairman and Chief Executive Officer. “Our revenue growth has accelerated nicely, and I am pleased to report our ninth consecutive quarter of double-digit earnings per share growth.” As previously reported, sales for the third quarter of fiscal 2010 were approximately $1.997billion, or 8.4% above sales of approximately $1.843 billion for the third quarter of fiscal 2009. Comparable store sales increased 7.0%. The increase in comparable store sales was a result of increased customer traffic, as measured by the number of register transactions. Average transaction value for the quarter was flat. Sales were strongest in the Seasonal and Electronics and Consumables categories. The gross profit margin, as a percentage of sales, was 36.6% in the third quarter of fiscal 2010 compared to 36.2% in the third quarter of fiscal 2009. The improvement in gross profit, as a percentage of sales, was a result of reductions in markdown expenses and inventory shrinkage. Selling, general and administrative (SG&A) expenses, as a percentage of sales, were 28.1% in the third quarter of fiscal 2010 compared with 28.7% in the third quarter of fiscal 2009. Most expenses, including occupancy costs, were leveraged during the quarter as a result of a strong comparable store sales increase and continued productivity improvements. In addition, insurance and incentive compensation expenses were lower during the quarter. These improvements more than offset investments related to expanded store operating hours and increased advertising. The Company's inventories at May 29, 2010, were $986.1 million, or 4.8% less than inventories of $1,035.3 million at May 30, 2009. In the first three quarters of fiscal 2010, capital expenditures were $136.4 million compared with $103.2 million in the first three quarters of fiscal 2009. During the first three quarters of fiscal 2010, the Company opened 125 new stores and closed 56 stores. During the first three quarters of fiscal 2010, the Company repurchased approximately 6.6 million shares of its common stock. As of May 29, 2010, the Company had authorization to purchase up to an additional $190.3 million of its common stock. Outlook “As we look to the fourth quarter, we expect that many of the trends we saw in the third quarter will continue. However, the environment remains challenging for consumers, and customers continue to buy close to need,“ said Mr. Levine. “The fourth quarter is off to a good start, with sales in comparable stores increasing an estimated 5.5% in June.” For the fourth quarter, the Company expects that comparable store sales will increase 5% to 7% and that earnings per share will be between $0.46 and $0.51 compared with $0.43 in the fourth quarter of fiscal 2009. For the full year, the Company expects that earnings per share will be between $2.53 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. Third Quarter Earnings Conference Call Information The Company plans to host a conference call with investors today, July 7, 2010, at 10:00 A.M. EDT to discuss results for the third quarter and nine months ended May 29, 2010. The Company will also provide an update on various business initiatives and discuss expectations for the fourth quarter of fiscal 2010. After some prepared remarks by management, participants will have an opportunity to ask questions. The Company's responses to questions, as well as other matters discussed during the conference call, may include information that has not been disclosed previously. If you wish to participate, please call (800) 779-6561 for domestic US calls and (517) 308-9046 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. EDT, July 7, 2010. The replay of the webcast will be available until August 7, 2010. About Family Dollar Beginning with one store in 1959 in Charlotte, North Carolina, the Company currently operates more than 6,700 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 Third Quarter Ended(in thousands, except per share amounts)May 29, 2010   % of Net SalesMay 30, 2009% of Net Sales   Net sales $ 1,996,989 100.00 % $ 1,843,089 100.00 %   Cost of sales   1,266,761 63.43 %   1,175,897 63.80 %   Gross margin 730,228 36.57 % 667,192 36.20 %   Selling, general and administrative expenses   560,165 28.05 %   528,158 28.66 %   Operating profit 170,063 8.52 % 139,034 7.54 %   Interest income 432 0.02 % 879 0.05 %   Interest expense   3,297 0.17 %   3,216 0.17 %   Income before income taxes 167,198 8.37 % 136,697 7.42 %   Income taxes   62,847 3.15 %   48,976 2.66 %   Net income $ 104,351 5.22 % $ 87,721 4.76 %   Net income per common share - basic $ 0.77 $ 0.63 Weighted average shares - basic 134,766 140,319   Net income per common share - diluted $ 0.77 $ 0.62 Weighted average shares - diluted 135,789 141,195   Dividends declared per common share $ 0.155 $ 0.135 FAMILY DOLLAR STORES, INC., AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(Unaudited)         For the Three Quarters Ended(in thousands, except per share amounts)May 29, 2010% of Net SalesMay 30, 2009% of Net Sales   Net sales $ 5,910,125 100.00 % $ 5,589,182 100.00 %   Cost of sales   3,780,844 63.97 %   3,636,233 65.06 %   Gross margin 2,129,281 36.03 % 1,952,949 34.94 %   Selling, general and administrative expenses   1,668,196 28.23 %   1,587,425 28.40 %   Operating profit 461,085 7.80 % 365,524 6.54 %   Interest income 1,096 0.02 % 6,042 0.11 %   Interest expense   10,000 0.17 %   9,778 0.17 %   Income before income taxes 452,181 7.65 % 361,788 6.48 %   Income taxes   168,000 2.84 %   130,638 2.34 %   Net income $ 284,181 4.81 % $ 231,150 4.14 %   Net income per common share - basic $ 2.07 $ 1.65 Weighted average shares - basic 136,977 140,044   Net income per common share - diluted $ 2.06 $ 1.64 Weighted average shares - diluted 137,734 140,629   Dividends declared per common share $ 0.445 $ 0.395 FAMILY DOLLAR STORES, INC., AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Unaudited)         As of(in thousands, except per share and share amounts)May 29, 2010May 30, 2009Assets Current assets: Cash and cash equivalents $ 343,595 $ 296,058 Investment securities 101,192 33,500 Merchandise inventories 986,061 1,035,259 Deferred income taxes 72,356 95,627 Prepayments and other current assets   53,856     54,711   Total current assets 1,557,060 1,515,155   Property and equipment, net 1,064,537 1,046,544 Investment securities 151,897 171,000 Other assets   28,122     24,616     Total assets$2,801,616   $2,757,315     Liabilities and Shareholders' Equity Current liabilities: Accounts payable $ 539,658 $ 462,631 Accrued liabilities 474,353 517,719 Income taxes   29,790     18,160   Total current liabilities 1,043,801 998,510   Long-term debt 250,000 250,000 Deferred income taxes 44,807 53,121 Income taxes 40,944 30,974 Commitments and contingencies   Shareholders' equity: Preferred stock, $1 par; authorized and unissued 500,000 shares Common stock, $.10 par; authorized 600,000,000 shares 14,647 14,535 Capital in excess of par 238,950 205,253 Retained earnings 1,611,830 1,346,527 Accumulated other comprehensive loss   (8,346 )   (10,433 ) 1,857,081 1,555,882 Less: common stock held in treasury, at cost   435,017     131,172   Total shareholders' equity   1,422,064     1,424,710     Total liabilities and shareholders' equity$2,801,616   $2,757,315   FAMILY DOLLAR STORES, INC., AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)           For the Three Quarters Ended(in thousands)May 29, 2010May 30, 2009 Cash flows from operating activities: Net income $ 284,181 $ 231,150 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 128,120 118,280 Deferred income taxes 11,333 (3,236 ) Excess tax benefits from stock-based compensation (1,566 ) (577 ) Stock-based compensation 9,037 9,772 Loss on disposition of property and equipment, including impairment 5,115 9,535 Changes in operating assets and liabilities: Merchandise inventories 7,736 (2,574 ) Income tax refund receivable 8,618 7,007 Prepayments and other current assets 5,312 3,471 Other assets (4,181 ) (288 ) Accounts payable and accrued liabilities (110,319 ) (61,312 ) Income taxes   31,053     11,961     374,439     323,189     Cash flows from investing activities: Purchases of investment securities (100,642 ) — Sales of investment securities 17,506 8,650 Capital expenditures (136,362 ) (103,190 ) Proceeds from dispositions of property and equipment   1,031     714     (218,467 )   (93,826 )   Cash flows from financing activities: Payment of debt issuance costs (651 ) (624 ) Repurchases of common stock (271,680 ) (38,456 ) Change in cash overdrafts 58,837 (27,256 ) Proceeds from exercise of employee stock options 19,015 27,827 Excess tax benefits from stock-based compensation 1,566 577 Payment of dividends   (58,354 )   (53,875 )   (251,267 )   (91,807 )   Net change in cash and cash equivalents (95,295 ) 137,556 Cash and cash equivalents at beginning of period   438,890     158,502   Cash and cash equivalents at end of period $ 343,595   $ 296,058   FAMILY DOLLAR STORES, INC., AND SUBSIDIARIESSelected Additional Information       NET SALES BY CATEGORY:For the Third Quarter EndedMay 29,May 30,(in thousands)   2010     2009   % Change   Consumables $ 1,309,763 $ 1,201,033 9.1 % Home products 254,165 237,384 7.1 % Apparel and accessories 226,690 219,193 3.4 % Seasonal and electronics   206,371     185,479   11.3 % TOTAL $ 1,996,989 $ 1,843,089 8.4 %   For the Three Quarters EndedMay 29,May 30,(in thousands)   2010     2009   % Change   Consumables $ 3,802,741 $ 3,565,542 6.7 % Home products 808,372 771,577 4.8 % Apparel and accessories 623,347 620,175 0.5 % Seasonal and electronics   675,665     631,888   6.9 % TOTAL $ 5,910,125 $ 5,589,182 5.7 %     STORES IN OPERATION:For the Three Quarters EndedMay 29,May 30,   2010     2009   Beginning Store Count 6,655 6,571 New Store Openings 125 148 Store Closings   (56 )   (65 ) Ending Store Count 6,724 6,654 Total Square Footage (000s) 57,267 56,527 Total Selling Square Footage (000s) 47,724 47,060