* FY EPS and sales forecasts are raised
* Q1 EPS 42 cents, tops Wall Street view of 40 cents
* December same-store sales up about 6 pct
* Shares rise as much as 17 pct
(Adds comments from CEO and analyst; updates stock rise)
By Jessica Wohl
CHICAGO, Jan 7 Family Dollar Stores Inc FDO.N
reported a jump in quarterly profit and raised its fiscal-year
forecast on Wednesday as more shoppers headed to its discount
stores, sending its shares up 17 percent.
Family Dollar caters to lower-income shoppers, many of whom
make less than $30,000 a year and have been hit hard by the
year-long U.S. recession.
Besides seeing its core shoppers spend more when they
visit, Family Dollar is also attracting more "middle-ish
income" customers, Chairman and Chief Executive Howard Levine
said during a conference call.
"Today, customers of all income levels are looking for ways
to stretch their budgets," Levine said.
Citing outside data, he said that "Family Dollar, as well
as the dollar channel overall, is gaining share in this
Family Dollar and other discounters such as Wal-Mart Stores
Inc (WMT.N), Dollar Tree Inc (DLTR.O) and Dollar General have
been doing well in the economic downturn, as consumers seek out
low-priced necessities such as food and cleaning supplies.
At the same time, Family Dollar has reduced its exposure to
more discretionary merchandise, like clothes and home goods.
"They're managing the risk in the business very well in a
very difficult environment," said BMO Capital Markets analyst
Wayne Hood, who has a "market perform" rating on the shares.
Family Dollar is also accepting food stamps at more
locations as more Americans start to use them. Levine said that
an estimated 14 million U.S. households relied on food stamps
as of September 2008, up about 17 percent from a year earlier.
Family Dollar's profit for the fiscal first quarter, ended
Nov. 29, rose to $59.3 million, or 42 cents per share, from
$51.9 million, or 37 cents per share, a year earlier. The
results topped analysts' average forecast by 2 cents per share
and met the high end of the company's expectations.
BUCKS WIDER RETAIL TREND
While retailers in general are expected to post a decline
of 1 percent in sales at stores open at least a year, or
same-store sales, according to the latest Thomson Reuters data,
Family Dollar bucked the trend [ID:nN06418196].
Sales rose 8 percent in the five weeks ended Jan. 3, with
same-store sales up about 6 percent, driven by food and toys.
December's same-store sales were "artificially inflated,"
as JP Morgan analyst Charles Grom put it, because the period
included the beginning of both December and January.
Cash-strapped shoppers often head to stores when they receive
paychecks or government checks at the beginning of the month.
Family Dollar's first-quarter sales rose more than 4
percent to $1.75 billion. Same-store sales rose 2.1 percent.
Seasonal markdowns and freight expenses were lower during
the quarter, while insurance expense and occupancy costs were
higher, the company said. Total inventories declined 2.7
percent to $1.09 billion. Excluding inventory in transit,
inventory per store fell about 4.5 percent.
Family Dollar said it expects to earn $1.63 to $1.81 per
share in the fiscal year ending on Aug. 29, up from a prior
view of $1.58 to $1.78. Analysts had forecast $1.68.
The company expects full-year sales to rise 4 percent to 6
percent, up from a prior outlook of 3 percent to 5 percent. On
a same-store basis, it forecast a sales gain of 2 percent to 4
percent; it previously called for a rise of 1 percent to 3
For the second quarter ending Feb. 28, Family Dollar
expects to earn between 48 cents and 52 cents per share, with
same-store sales up 3 percent to 5 percent.
Family Dollar shares were up $3.04 at $27.37 after trading
as high as $28.49. The stock gained nearly 36 percent in 2008,
compared with an overall market decline and an 18 percent rise
BMO's Hood said some investors may have shorted the stock
going into the quarter due to the strong run it had and a
concern that Family Dollar was losing market share.
"The business models, for all of these companies, are
stronger than they've ever been in their history," he said.
(Reporting by Jessica Wohl; Editing by Derek Caney, Lisa Von
Ahn, John Wallace and Gunna Dickson)