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Press release from PR Newswire

Family Dollar Reports Record First Quarter Sales and Earnings

Wednesday, January 05, 2011

Family Dollar Reports Record First Quarter Sales and Earnings07:02 EST Wednesday, January 05, 2011- First Quarter Comparable Store Sales Increased 6.9% - Earnings Per Diluted Share Increased 18.4% To $0.58 - December Comparable Store Sales Increased Approximately 4% - Management Updates Earnings Guidance for FY11MATTHEWS, N.C., Jan. 5, 2011 /PRNewswire/ -- Family Dollar Stores, Inc. (NYSE: FDO) today reported that net sales for the first quarter of fiscal 2011 ended November 27, 2010, increased 9.5% to $1.997 billion compared to $1.823 billion in the first quarter of fiscal 2010.  Net income for the quarter increased 9.9% to $74.3 million compared with net income of $67.6 million for the first quarter of fiscal 2010.  Net income per diluted share for the quarter increased 18.4% to $0.58 compared with $0.49 for the first quarter of fiscal 2010.  (Logo:  http://photos.prnewswire.com/prnh/20110105/CL24593LOGO )"Our comparable store sales increase of 6.9% is the best first quarter result we've delivered in more than twelve years," said Howard R. Levine, Chairman and Chief Executive Officer.  "Clearly, our investments to improve the shopping experience in our stores are positioning us well to serve a growing number of Family Dollar customers."First Quarter ResultsComparable store sales for the first quarter increased 6.9%. The increase in comparable store sales was a result of an increase in customer traffic, as measured by the number of register transactions; average transaction value for the quarter was approximately flat. Although sales increased in all merchandise categories, sales were strongest in the Consumables category driven primarily by double-digit increases in candy and food.  Gross profit margin, as a percentage of sales, was 36.0% in the first quarter of fiscal 2011 compared to 36.1% in the first quarter of fiscal 2010.  The decline in gross profit, as a percentage of sales, was a result of stronger sales of lower-margin consumable merchandise and higher freight expense, which were mostly offset by lower inventory shrinkage.  Selling, general and administrative (SG&A) expenses, as a percentage of sales, were 29.9% in the first quarter of fiscal 2011 compared with 30.1% in the first quarter of fiscal 2010.   Most expenses, including occupancy costs, were leveraged during the quarter as a result of a strong comparable store sales increase.  These improvements were partially offset by investments related to expanded store operating hours, store renovations and enhanced marketing efforts.  The Company's inventories at November 27, 2010, were $1.138 billion, or 10.8% greater than inventories of $1.028 billion at November 28, 2009.  Average inventory per store at the end of the first quarter of fiscal 2011 was approximately 8% higher than the average inventory per store at the end of the first quarter of fiscal 2010.  The increase in inventories was primarily a result of investments to support higher in-stock levels in stores and expansions of consumable assortments, particularly in renovated stores.  In the first quarter of fiscal 2011, capital expenditures were $38.9 million compared with $39.1 million in the first quarter of fiscal 2010. During the first quarter of fiscal 2011, the Company opened 85 new stores and closed 18 stores compared to 43 new stores and 33 closings in the first quarter of fiscal 2010. In addition, since launching its multi-year renovation initiative in August, the Company has completed 202 store renovations, including 173 renovations during the first quarter.As part of its previously announced $750 million share repurchase authorization, the Company entered into an accelerated share repurchase agreement in October 2010 to repurchase $250 million of its common stock.  During the first quarter, the Company received approximately 4.4 million shares related to this transaction.  The Company has authorization to purchase up to an additional $500 million of its common stock.Holiday Season Update"Our stores had a busy holiday season, resulting in a comparable stores sales increase for December of approximately 4% with strong performance in the toy and consumable areas," said Levine.  OutlookReflecting the Company's performance year-to-date through December, the Company now expects that diluted earnings per share will be between $3.08 and $3.23 compared with $2.62 in fiscal 2010.  This expectation includes an additional $0.04 related to the estimated impact of the continuation of the Company's stock repurchase program.The Company's outlook for fiscal 2011 is based on the following assumptions which may or may not prove valid:An increase in net sales of between 8% and 10%; An increase in comparable store sales of between 5% and 7%;Approximately 300 new store openings and 80-100 store closings; A modest increase in operating profit, as a percentage of sales;An effective income tax rate of approximately 37%;Weighted average diluted shares of approximately 125.5 million, reflecting additional stock repurchases in fiscal 2011; andCapital expenditures of between $300 million and $350 million.For the second quarter of fiscal 2011, the Company expects that comparable store sales will increase 5% to 6% and that earnings per diluted share will be between $0.92 and $0.97 per share compared with $0.81 per share in the second quarter of fiscal 2010.  Cautionary StatementsCertain 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 and financing plans, net sales, comparable store sales, cost of sales, SG&A expenses, earnings per diluted share, dividends, and share repurchases.  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.First Quarter Earnings Conference Call InformationThe Company plans to host a conference call with investors today at 10:00 A.M. ET to discuss the results.  If you wish to participate, please dial (800) 779-6561 for USA domestic calls or (517) 308-9046 for international calls.  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=irhomeA replay of the webcast will be available at the same address noted above after 2:00 P.M. ET, today.About Family DollarBeginning with one store in 1959 in Charlotte, North Carolina, the Company currently operates more than 6,800 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 SUBSIDIARIESCONSOLIDATED STATEMENTS OF INCOME(Unaudited)For the First Quarter Ended(in thousands, except per share amounts)November 27, 2010% of Net SalesNovember 28, 2009% of Net SalesNet sales$            1,996,941100.00%$            1,822,906100.00%Cost of sales1,277,37663.97%1,164,68463.89%Gross margin719,56536.03%658,22236.11%Selling, general and administrative expenses597,98329.94%548,55130.09%Operating profit121,5826.09%109,6716.02%Interest income3870.02%3950.02%Interest expense3,5180.18%3,3350.18%Income before income taxes118,4515.93%106,7315.85%Income taxes44,1362.21%39,1102.15%Net income$                 74,3153.72%$                 67,6213.71%Net income per common share - basic$                     0.58$                     0.49Weighted average shares - basic127,984138,686Net income per common share - diluted$                     0.58$                     0.49Weighted average shares - diluted129,141139,271Dividends declared per common share$                   0.155$                   0.135FAMILY DOLLAR STORES, INC., AND SUBSIDIARIESCONSOLIDATED BALANCE SHEETS(Unaudited)For the First Quarter Ended*November 27,November 28,(in thousands, except per share and share amounts)20102009AssetsCurrent assets:Cash and cash equivalents$84,621$366,357Investment securities52,5662,710Merchandise inventories1,138,4661,027,514Deferred income taxes63,92354,455Prepayments and other current assets75,16960,510Total current assets1,414,7451,511,546Property and equipment, net1,110,6071,050,841Investment securities145,014163,141Other assets70,75364,501Total assets$2,741,119$2,790,029Liabilities and Shareholders' EquityCurrent liabilities:Current portion of long-term debt$16,200$?Accounts payable627,657501,030Accrued liabilities324,993286,790Income taxes 48,1691,743Total current liabilities1,017,019789,563Long-term debt233,800250,000Other liabilities215,358239,591Deferred income taxes45,67437,203Commitments and contingenciesShareholders' Equity:Preferred stock, $1 par; authorized and unissued 500,000 sharesCommon stock, $.10 par; authorized 600,000,000 shares14,70214,593Capital in excess of par255,971218,891Retained earnings1,720,4001,436,846Accumulated other comprehensive loss(8,494)(8,117)1,982,5791,662,213Less: common stock held in treasury, at cost753,311188,541Total shareholders' equity1,229,2681,473,672Total liabilities and shareholders' equity$2,741,119$2,790,029* Certain adjustments and reclassifications of the amounts for fiscal 2010 have been made to conform to the presentation for fiscal 2011.FAMILY DOLLAR STORES, INC., AND SUBSIDIARIESCONSOLIDATED STATEMENTS OF CASH FLOWS(Unaudited)For the First Quarter Ended*(in thousands)November 27, 2010November 28, 2009Cash flows from operating activities:Net income$                    74,315$                    67,621Adjustments to reconcile net income to net cash provided by operating activities:Depreciation and amortization43,99242,019Deferred income taxes80220,076Excess tax benefits from stock-based compensation(3,599)(314)Stock-based compensation5,1135,401Loss on disposition of property and equipment, includingimpairment3,2232,541Changes in operating assets and liabilities:Merchandise inventories(110,444)(33,717)Income tax refund receivable?8,618Prepayments and other current assets(12,164)2,695Other assets(5,066)289Accounts payable and accrued liabilities(76,935)(119,268)Income taxes 29,72267Other liabilities10,8212,792(40,220)(1,180)Cash flows from investing activities:Purchases of investment securities(19,128)?Sales of investment securities86,2864,850Capital expenditures(38,918)(39,140)Proceeds from dispositions of property and equipment14118828,381(34,102)Cash flows from financing activities:Revolving credit facility borrowings36,000?Repayment of revolving credit facility borrowings(36,000)?Payment of debt issuance costs(2,912)?Repurchases of common stock(257,784)(24,758)Changes in cash overdrafts(17,931)?Proceeds from exercise of employee stock options8,9265,931Excess tax benefits from stock-based compensation3,599314Payment of dividends(20,192)(18,738)(286,294)(37,251)Net change in cash and cash equivalents(298,133)(72,533)Cash and cash equivalents at beginning of period382,754438,890Cash and cash equivalents at end of period$                    84,621$                  366,357*  Certain adjustments and reclassifications of the amounts for fiscal 2010 have been made to conform to the presentation for fiscal 2011.   FAMILY DOLLAR STORES, INC., AND SUBSIDIARIESSelected Additional InformationNET SALES BY DIVISION:For the First Quarter EndedNovember 27,November 28,(in thousands)20102009% ChangeConsumables$1,355,453$1,221,85710.9%Home products253,036235,2977.5%Apparel and accessories192,812182,2995.8%Seasonal and electronics195,640183,4536.6%   TOTAL$1,996,941$1,822,9069.5%STORES IN OPERATION:For the First Quarter EndedNovember 27,November 28,20102009Beginning Store Count6,7856,655New Store Openings8543Store Closings(18)(33)Ending Store Count6,8526,665Total Square Footage (000s)58,45556,745Total Selling Square Footage (000s)48,72147,263INVESTOR CONTACT:  Kiley F. Rawlins, CFA(704) 849-7496krawlins@familydollar.comMEDIA CONTACT:Josh Braverman(704) 814-3447jbraverman@familydollar.comSOURCE Family Dollar Stores, Inc.For further information: INVESTOR CONTACT: Kiley F. Rawlins, CFA, +1-704-849-7496, krawlins@familydollar.com; or MEDIA CONTACT: Josh Braverman, +1-704-814-3447, jbraverman@familydollar.com