(Adds analyst comment, updates stock activity)
By Dhanya Skariachan
Jan 9 Family Dollar Stores Inc reported
weaker-than-expected quarterly results and cut its fiscal-year
outlook after it was forced to discount more than it had
originally planned to win shoppers in the holiday season.
The company also said President and Chief Operating Officer
Michael Bloom had resigned to pursue other interests and that it
would conduct a search for a replacement. Its shares fell more
than 7 percent.
Thursday's news led some analysts to conclude that Family
Dollar's senior management overhaul, investments in store
renovations and recent decision to stock more food, cleaning
supplies and other products have not paid off.
"The returns on investment just quite frankly have been
disappointing," said BB&T Capital Markets analyst Anthony
Chukumba. "You see evidence of that with Michael Bloom leaving."
Bloom, who joined in the fall of 2011, was responsible for
many recent changes, including the expansion of frequently
replenished items like food and toilet paper as well as the
introduction of tobacco.
"I believe we strayed from our core strategy of serving the
value-conscious consumer," Chief Executive Officer Howard Levine
said on a conference call on Thursday.
Since the summer, Family Dollar has begun selling tobacco
products and renovated thousands of stores. While those efforts
lured more customers, they also resulted in margin pressure and
higher store manager turnover, Levine told investors.
Macroeconomic factors are also hurting Family Dollar, but to
a smaller extent, analysts said.
There is "no question" that-low income consumers are
pressured, Chukumba said, adding that sales growth was slowing
at rivals Dollar General Corp and Dollar Tree Inc
Family Dollar slashed its earnings outlook for the fiscal
year to a range of $3.25 to $3.55 a share. It previously had
called for $3.80 to $4.15.
Dollar stores have also battled more competition from
discounters such as Wal-Mart Stores, which are offering
more items priced at $1 or less to woo thrifty shoppers.
Net income fell to $78 million, or 68 cents a share, in the
first quarter ended Nov. 30 from $80.3 million, or 69 cents a
share, a year earlier. Analysts on average were expecting a
profit of 69 cents a share, according to Thomson Reuters
Net sales rose 3.2 percent to $2.50 billion, but missed the
analysts' estimate of $2.51 billion. Sales at stores open at
least a year fell 2.8 percent.
Shares of Family Dollar were down 7.1 percent at $61.60 in
(Reporting by Dhanya Skariachan in New York and Lisa Baertlein
in Los Angeles; Editing by Lisa Von Ahn)