Family Dollar Reports First Quarter Results

Thu Jan 3, 2013 7:00am EST

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* First Quarter Net Sales Increased 12.7%
* Comparable Store Sales Increased 6.6%
* Earnings Per Diluted Share Increased to $0.69
* December Comparable Store Sales Increased Approximately 2.5%
* Management Provides Updated Guidance for FY13

MATTHEWS, N.C.--(Business Wire)--
Family Dollar Stores, Inc. (NYSE: FDO) today reported that for the first quarter
of fiscal 2013 ended November 24, 2012, net sales increased to $2.42billion and
net income per diluted share for the quarter increased to $0.69. 

"The investments we have made to increase our relevance to the customer are
delivering results. We are driving more traffic, and we are increasing our
market share," said Howard R. Levine, Chairman and CEO. "While the near-term
economic environment remains difficult to predict, I continue to be excited
about the long-term opportunity for our business. We are seeing tangible
benefits from our margin-enhancing investments in global sourcing and private
brands, and as we work to drive further benefit from the investments we are
making to expand profitability, I remain confident that our efforts will deliver
stronger results as we progress through fiscal 2013 and beyond." 

Fiscal 2013 First Quarter Results

Commenting on the first quarter results, Levine said, "Early results from our
sales-driving initiatives exceeded our expectations in the first quarter,
resulting in more gross margin pressure than anticipated. This mix pressure,
combined with expected headwinds from insurance expense, resulted in earnings
that were at the low end of our guidance." 

Net sales for the quarter increased 12.7% to $2.42 billion compared to $2.15
billion in the first quarter of fiscal 2012. Sales were strongest in the
Consumables category, which increased 18.5% during the quarter, driven primarily
by strong growth in tobacco, food and health and beauty aids. During the
quarter, the Company opened 125 new stores, closed one store, and renovated,
relocated or expanded 169 stores. 

Comparable store sales for the quarter increased 6.6% as a result of increased
customer traffic and an increase in the average customer transaction value. 

Gross profit for the quarter increased 9.1% to $826.8 million, or 34.1% of net
sales, compared to $757.6 million, or 35.3% of net sales, in the first quarter
of fiscal 2012. As a percentage of sales, the impact of stronger sales of
lower-margin consumables, higher markdowns and increased inventory shrinkage was
partially offset by higher markups and lower freight expense. 

Selling, general and administrative (SG&A) expenses, as a percentage of net
sales, were 28.9% in the quarter compared to 29.2% in the first quarter of
fiscal 2012. Most expenses were leveraged during the quarter. Additionally, as a
percentage of net sales, lower store labor expenses were offset by higher
insurance expense and higher marketing expense. 

The effective income tax rate in the quarter was 36.4% as compared to 37.4% in
the first quarter of fiscal 2012. The decrease in the effective tax rate was due
primarily to foreign tax benefits associated with the Company`s global sourcing
efforts and favorable resolution of uncertain state tax positions, which were
partially offset by a decrease in federal jobs tax credits. 

Net income for the quarter was $80.3 million compared with net income of $80.4
million for the first quarter of fiscal 2012. 

The Company`s merchandise inventories at November 24, 2012, were $1.59 billion
compared with $1.30 billion at November 26, 2011. Average inventory per store at
the end of the quarter was 15.1% higher than the average inventory per store at
the end of the first quarter of fiscal 2012. The increase in inventories was the
result of investments to expand the Company`s consumable categories, primarily
health and beauty aids and food assortments. 

In the quarter, capital expenditures were $196.4 million compared with $130.9
million in the first quarter of fiscal 2012. The growth in capital expenditures
related to increased investments in new stores. 

During the first quarter of fiscal 2013, the Company repurchased approximately
0.4 million shares of its common stock for a total cost of $25.0 million. As of
November 24, 2012, the Company had the authorization to purchase up to an
additional $120.8 million of its common stock. 

Outlook

"The holiday selling season proved to be more challenging than we expected as
customers faced increasing financial uncertainty. Comparable stores sales for
December increased about 2.5%, driven primarily by strong, double-digit sales of
Consumables. Discretionary categories continued to be pressured, reflecting
ongoing consumer caution," said Levine. "Despite the ongoing economic
uncertainty, we expect that the investments we have made in traffic-driving
categories will continue to build sales momentum through January and February,
as customers focus even more on basic needs." 

The Company anticipates that many of the sales and margin trends that occurred
in the first quarter will continue in the second quarter. Reflecting December
results, the Company expects that comparable store sales will increase between
4% and 5% in the second quarter of fiscal 2013 and that earnings per diluted
share will be between $1.18 and $1.28 per share compared with $1.15 per share in
the second quarter of fiscal 2012. Consistent with the National Retail
Federation Calendar, the second quarter of fiscal 2013 will include an extra
week. The extra week is expected to add approximately $0.09 of earnings per
diluted share to the year, which is included in the Company`s earnings guidance.


Reflecting the Company`s performance year-to-date through December, the Company
now expects that diluted earnings per share in fiscal 2013 will be between $3.95
and $4.20 compared to $3.58 in fiscal 2012. The Company's outlook for fiscal
2013 is based on the following assumptions which may or may not prove valid:

* An increase in comparable store sales of between 4% and 6%; 
* Approximately 500 new store openings and 70-90 store closings; 
* Gross margin pressure driven primarily by an expanding mix of lower-margin
consumables; 
* SG&A leverage driven by a strong increase in comparable store sales; 
* An effective income tax rate between 36% and 37%; 
* Weighted average diluted shares of approximately 116 million; and 
* Capital expenditures of between $600 million and $650 million to support new
store openings, store renovations, merchandising initiatives, and expansion of
the Company`s supply chain.

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 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 Report 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. 

Earnings Conference Call Information

The Company plans to host a conference call with investors today, January 3,
2013, at 10:00 a.m. ET to discuss the results. The Company will also provide an
update on various business initiatives and discuss plans and expectations for
the rest of fiscal 2013. 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 (888) 329-8903 for domestic US calls and
(719) 325-2320 for international calls at least 10 minutes before the call is
scheduled to begin. The passcode for the conference call is 7056645 or "FAMILY
DOLLAR." 

A live webcast of the conference call 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 address noted above after 11:00
a.m. ET, January 3, 2012. 

About Family Dollar

For more than 50 years, Family Dollar has been providing value and convenience
to customers in easy-to-shop neighborhood locations. Family Dollar`s mix of name
brands and quality, private brand merchandise appeals to shoppers in more than
7,500 stores in rural and urban settings across 45 states. Helping families save
on the items they need with everyday low prices creates a strong bond with
customers, who often refer to their neighborhood store as "my Family Dollar."
Headquartered in Matthews, North Carolina, just outside of Charlotte, Family
Dollar is a Fortune 300, 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 First Quarter Ended*                                                            
 (in thousands, except per share amounts)          November 24,             % of Net               November 26,             % of Net       
                                                    2012                     Sales                  2011                     Sales         
                                                                                                                                           
 Net sales                                         $        2,421,688       100.00  %              $        2,148,287       100.00  %      
                                                                                                                                           
 Cost of sales                                              1,594,894       65.86   %                       1,390,715       64.74   %      
                                                                                                                                           
 Gross profit                                               826,794         34.14   %                       757,572         35.26   %      
                                                                                                                                           
 Selling, general and administrative expenses               699,825         28.90   %                       627,585         29.21   %      
                                                                                                                                           
 Operating profit                                           126,969         5.24    %                       129,987         6.05    %      
                                                                                                                                           
 Investment income                                          75              0.00    %                       234             0.01    %      
                                                                                                                                           
 Interest expense                                           7,122           0.29    %                       6,712           0.31    %      
                                                                                                                                           
 Other income                                               6,362           0.26    %                       4,923           0.23    %      
                                                                                                                                           
 Income before income taxes                                 126,284         5.21    %                       128,432         5.98    %      
                                                                                                                                           
 Income taxes                                               46,005          1.90    %                       48,082          2.24    %      
                                                                                                                                           
 Net income                                        $        80,279          3.32    %              $        80,350          3.74    %      
                                                                                                                                           
 Net income per common share - basic               $        0.69                                   $        0.68                           
 Weighted average shares - basic                            115,521                                         117,649                        
                                                                                                                                           
 Net income per common share - diluted             $        0.69                                   $        0.68                           
 Weighted average shares - diluted                          116,197                                         118,591                        
                                                                                                                                           
 Dividends declared per common share               $        0.21                                   $        0.18                           
                                                                                                                                           
                                                                                                                                           
 *Certain reclassifications of the amounts for fiscal 2012 have been made to conform to the presentation for fiscal 2013.                  


 FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES                                                                                                    
 CONSOLIDATED BALANCE SHEETS                                                                                                                     
 (Unaudited)                                                                                                                                     
                                                                                                                                                 
                                                                                                     As of                                       
                                                                                                     November 24,            November 26,        
 (in thousands, except per share and share amounts)                                                  2012                    2011                
 Assets                                                                                                                                          
 Current assets:                                                                                                                                 
                  Cash and cash equivalents                                                          $        112,267        $        103,706    
                  Short-term investment securities                                                            9,560                   51,630     
                  Restricted cash and investments                                                             80,884                  -          
                  Merchandise inventories                                                                     1,592,068               1,301,577  
                  Deferred income taxes                                                                       71,557                  56,477     
                  Income tax refund receivable                                                                -                       7,181      
                  Prepayments and other current assets                                                        75,082                  77,397     
                                                    Total current assets                                      1,941,418               1,597,968  
                                                                                                                                                 
 Property and equipment, net                                                                                  1,636,189               1,355,287  
 Investment securities                                                                                        23,489                  94,543     
 Other assets                                                                                                 86,350                  73,353     
                                                                                                                                                 
 Total assets                                                                                        $        3,687,446      $        3,121,151  
                                                                                                                                                 
 Liabilities and Shareholders' Equity                                                                                                            
 Current liabilities:                                                                                                                            
                  Short-term borrowings                                                              $        209,000        $        75,000     
                  Current portion of long-term debt                                                           16,200                  16,200     
                  Accounts payable                                                                            752,231                 719,175    
                  Accrued liabilities                                                                         316,347                 271,262    
                  Income taxes                                                                                32,618                  7,753      
                                                    Total current liabilities                                 1,326,396               1,089,390  
                                                                                                                                                 
 Long-term debt                                                                                               500,158                 516,207    
 Other liabilities                                                                                            277,738                 263,245    
 Deferred gain                                                                                                154,611                 -          
 Deferred income taxes                                                                                        75,950                  104,608    
 Commitments and contingencies                                                                                                                   
                                                                                                                                                 
 Shareholders' equity:                                                                                                                           
                  Preferred stock, $1 par; authorized and unissued 500,000 shares                             -                       -          
                  Common stock, $.10 par; authorized 600,000,000 shares                                       11,993                  11,897     
                  Capital in excess of par                                                                    282,957                 243,414    
                  Retained earnings                                                                           1,290,436               941,572    
                  Accumulated other comprehensive loss                                                        (1,795)                 (6,697)    
                  Common stock held in treasury, at cost                                                      (230,998)               (42,485)   
                                                    Total shareholders' equity                                1,352,593               1,147,701  
                                                                                                                                                 
 Total liabilities and shareholders' equity                                                          $        3,687,446      $        3,121,151  


 FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES                                                                                                                               
 CONSOLIDATED STATEMENTS OF CASH FLOWS                                                                                                                                      
 (Unaudited)                                                                                                                                                                
                                                                                                                                                                            
                                                                                                                        For the First Quarter Ended                         
 (in thousands)                                                                                                         November 24,                November 26,            
                                                                                                                         2012                        2011                   
 Cash flows from operating activities:                                                                                                                                      
                Net income                                                                                              $     80,279                $      80,350           
                Adjustments to reconcile net income to net cash provided by operating activities:                                                                           
                                              Depreciation and amortization                                                   57,175                       49,135           
                                              Amortization of deferred gain                                                   (2,857    )                  -                
                                              Deferred income taxes                                                           17,919                       28,595           
                                              Excess tax benefits from stock-based compensation                               (12,654   )                  (10,572   )      
                                              Stock-based compensation                                                        4,413                        5,423            
                                              Loss on disposition of property and equipment,                                  2,860                        7,173            
                                              including impairment                                                                                                          
                                              Changes in operating assets and liabilities:                                                                                  
                                                                            Merchandise inventories                           (165,906  )                  (146,917  )      
                                                                            Prepayments and other current assets              (27,472   )                  (5,953    )      
                                                                            Other assets                                      (2,073    )                  616              
                                                                            Accounts payable and accrued liabilities          10,003                       (54,325   )      
                                                                            Income taxes                                      761                          5,924            
                                                                            Other liabilities                                 9,784                        (6,172    )      
                                                                                                                              (27,768   )                  (46,723   )      
                                                                                                                                                                            
 Cash flows from investing activities:                                                                                                                                      
                Purchases of investment securities                                                                            (10,720   )                  (12,182   )      
                Sales of investment securities                                                                                7,542                        68,592           
                Net change in restricted cash                                                                                 46,009                       -                
                Capital expenditures                                                                                          (196,386  )                  (130,862  )      
                Net proceeds from sale-leaseback                                                                              1,132                        -                
                Proceeds from dispositions of property and equipment                                                          162                          96               
                                                                                                                              (152,261  )                  (74,356   )      
                                                                                                                                                                            
 Cash flows from financing activities:                                                                                                                                      
                Revolving credit facility borrowings                                                                          598,000                      173,000          
                Repayment of revolving credit facility borrowings                                                             (404,000  )                  (98,000   )      
                Repayment of long-term debt                                                                                   (16,200   )                  (16,200   )      
                Repurchases of common stock                                                                                   (24,980   )                  (27,435   )      
                Change in cash overdrafts                                                                                     43,138                       41,819           
                Proceeds from exercise of employee stock options                                                              15,578                       20,752           
                Excess tax benefits from stock-based compensation                                                             12,654                       10,572           
                Payment of dividends                                                                                          (24,227   )                  (21,128   )      
                                                                                                                              199,963                      83,380           
                                                                                                                                                                            
 Net change in cash and cash equivalents                                                                                      19,934                       (37,699   )      
 Cash and cash equivalents at beginning of period                                                                             92,333                       141,405          
 Cash and cash equivalents at end of period                                                                             $     112,267               $      103,706          


 FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES                                                                       
 Selected Additional Information                                                                                    
                                                                                                                    
                                                                                                                    
 NET SALES BY CATEGORY:                                                                                             
                                        For the First Quarter Ended                                                 
                                        November 24,                   November 26,                                 
 (in thousands)                         2012                           2011                          % Change       
 Consumables                            $      1,789,285               $      1,509,536              18.5      %    
 Home products                                 242,335                        246,000                -1.5      %    
 Apparel and accessories                       178,026                        186,214                -4.4      %    
 Seasonal and electronics                      212,042                        206,537                2.7       %    
 TOTAL                                  $      2,421,688               $      2,148,287              12.7      %    
                                                                                                                    
                                                                                                                    
 STORES IN OPERATION:                                                                                               
                                        For the First Quarter Ended                                                 
                                        November 24,                   November 26,                                 
                                        2012                           2011                                         
 Beginning Store Count                         7,442                          7,023                                 
 New Store Openings                            125                            101                                   
 Store Closings                                (1         )                   (4         )                          
 Ending Store Count                            7,566                          7,120                                 
 Total Square Footage (000s)                   64,927                         60,846                                
 Total Selling Square Footage (000s)           54,245                         50,760                                


Family Dollar Stores, Inc.
Investor Contact:
Kiley F. Rawlins, CFA, 704-849-7496
krawlins@familydollar.com
or
Media Contact:
Josh Braverman
jbraverman@familydollar.com

Copyright Business Wire 2013
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