April 4, 2008 / 11:10 AM / 9 years ago

Family Dollar profit falls, cuts full-year forecast

NEW YORK (Reuters) - Family Dollar Stores Inc FDO.N posted a lower quarterly profit on Friday as cash-strapped shoppers limited discretionary spending, and the discount retailer once again cut its full-year earnings forecast, saying economic conditions have continued to deteriorate.

The retailer, which prices most of its merchandise below $10, now expects fiscal year earnings of $1.50 to $1.60 per share. In January, it said it expected earnings of $1.56 to $1.64 for the year, which was down from a previous forecast of $1.62 to $1.74.

"Our customers continue to react to the current economic environment by limiting their discretionary spending," said Howard Levine, chairman and chief executive, in a statement.

Net income fell to $63.3 million, or 45 cents per share, for the fiscal second quarter, ended March 1, from $90.5 million, or 60 cents per share, a year ago.

Analysts, on average, were expecting it to earn 42 cents per share, according to Reuters Estimates. In January, Family Dollar had forecast per-share earnings of 40 cents to 44 cents for the period, which at the time was below analysts' average estimate of 57 cents.

Sales declined 6 percent to $1.83 billion in the quarter, which contained one fewer week of sales than a year earlier.

Family Dollar has said its shoppers are severely strapped for cash by the end of the month and have been consolidating their store trips, spending more time at home and putting fewer dollars toward discretionary items, like apparel.

For March, it expects comparable store sales, a key retail gauge that measures sales at stores open at least a year, to fall 4 percent to 5 percent. While sales of consumable items have been strong, it said sales in categories like clothing and lawn and garden items have been weaker.

For its third quarter, it forecast comparable-store sales to be flat to up slightly.

It forecast third-quarter earnings of 39 to 44 cents per share and fourth-quarter earnings of 29 to 34 cents per shares.

Reporting by Nicole Maestri; Editing by Derek Caney and Steve Orlofsky

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