* Earnings of $1.21/share misses estimate by 1 cent
* Sales up 17.7 pct at $2.89 billion, meet expectations
* Sees FY profit below Wall Street estimates
By Jessica Wohl
April 10 Family Dollar Stores Inc said
on Wednesday that sales have perked up as spring weather has
finally arrived, but reported a weaker-than-expected quarterly
profit which it blamed on a delay in shoppers getting their tax
Still, the discount retailer was cautious about its upcoming
performance, cutting its annual profit forecast for the second
time due to expectations its customers would hold off on
Sales at the end of January and in early February came under
pressure as shoppers waited longer than usual for their tax
refunds. The U.S. Internal Revenue Service more closely
scrutinized tax returns that included earned income tax credit
claims this year, leading to some delays. More than 13 million
low-to-moderate-income Americans claimed the credit in 2012.
Sales trends improved later in the quarter as shoppers
started to get their refunds, but they held off on buying items
like spring apparel due to the cold weather.
Family Dollar expects sales of discretionary items such as
apparel and home goods could remain under pressure this year.
Customers are buying everyday products such as food and
cigarettes, but they have lower profit margins than items like
short-sleeved shirts and tank tops.
"You're dealing with the low-end consumer. They buy when
they need it," said Brian Yarbrough, consumer research analyst
at Edward Jones. "It does definitely sound like things in April,
as the weather has gotten better, have picked up a little bit."
Shares of Family Dollar were up 0.2 percent at $59.93 in
afternoon trading after falling as low as $58.27.
The stock recovered after executives said on a conference
call that sales at stores open at least a year were up about 2
percent in March. Family Dollar also saw "good sales" with the
dose of warmth in early April, Chief Executive Howard Levine
"I still am very cautious on the stock," said Steven
Soranno, senior analyst at Calvert Investment Management, adding
that Family Dollar plans to spend more on capital projects and
rely on lower-margin food and other items to drive sales growth.
SALES MEET EXPECTATIONS
In the second quarter ended March 2, net income rose to
$140.1 million, or $1.21 per share, from $136.4 million, or
$1.15 per share, a year earlier. Analysts looked for a profit of
$1.22 per share, according to Thomson Reuters I/B/E/S.
Sales jumped 17.7 percent to $2.89 billion, meeting Wall
Sales at stores open at least a year, or same-store sales,
rose less than expected - up 2.9 percent versus the company's
own forecast of 4 percent to 5 percent and analysts' average
target of 4.1 percent, according to Thomson Reuters I/B/E/S.
Family Dollar continues to add more food and other items to
its stores to better compete against larger rivals such as
Dollar General Corp. Both of the so-called dollar stores
are trying to win shoppers from competitors like Wal-Mart Stores
Inc, whose sales were also hit by the delayed tax
refunds earlier this year.
Dollar General posted better-than-expected quarterly profit
last month and said 2013 sales could surpass a strong 2012 as it
focuses on goods such as food to attract shoppers in an
CUTS FORECAST AGAIN
For the fiscal year, Family Dollar now sees earnings of
$3.73 to $3.93 a share, while analysts, on average, targeted
$3.98 a share.
Family Dollar had previously cut its forecast in January,
bringing it down to $3.95 to $4.20 per share from an October
outlook of $4.10 to $4.40 per share.
Same-stores sales are now expected to rise 3 percent to 4
percent this year, versus a prior goal of 4 percent to 6
percent. The company now forecasts capital expenditures at $650
million to $700 million this year, up from a prior plan for $600
million to $650 million.
For the current third quarter, it expects to earn 98 cents
to $1.08 per share, below analysts' average target of $1.18.
Same-store sales are expected to be at the low end of a 2
percent to 4 percent increase in the third quarter, it said.