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FAMILY DOLLAR REPORTS 17
CONSECUTIVE QUARTER OF DOUBLE-DIGIT EARNINGS PER SHARE GROWTH
Earnings Per Diluted Share Increased 16.5% to a Record $1.06
Comparable Store Sales Increased 5.0%
Two Sale-Leaseback Transactions Completed, Generating $356.4 Million in Proceeds
Management Reaffirms Guidance for FY12
MATTHEWS, NC, June 28, 2012
- Family Dollar Stores, Inc. (NYSE: FDO) today reported that net income for the third quarter of fiscal 2012, ended May 26, 2012, increased 12.1% to $124.5 million compared with net income of $111.1 million for the third quarter of fiscal 2011.
Net income per diluted share for the quarter increased 16.5% to $1.06 compared with $0.91 for the third quarter of fiscal 2011.
“Today, we reported another quarter of strong double-digit earnings growth.
I am especially pleased that we delivered these record results even as we launched multiple initiatives late in the quarter to increase our relevancy to the customer and drive greater store productivity,”
said Howard R. Levine, Chairman and CEO.
Delivering stronger shareholder returns begins with increasing sales per square foot, and this quarter, we began to implement a number of initiatives to broaden our consumable assortment and satisfy more of our customers’ shopping trips.
As planned, most of these initiatives began late in the quarter and had little impact on our third quarter sales results,” continued Levine.
“We are on schedule, and I am very pleased with the progress our teams have made in such a short period of time.
As we complete most of these initiatives in the fourth quarter, we will have a fully competitive assortment and will be well-positioned to accelerate sales productivity further.”
Third Quarter Results
Total net sales for the third quarter of fiscal 2012 increased 9.6% to $2.36 billion compared with total net sales of $2.15 billion in the third quarter of fiscal 2011.
Comparable store sales increased 5.0%.
This increase was a result of increased customer traffic, as measured by the number of register transactions, and an increase in the average customer transaction value.
Sales were strongest in the Seasonal and Electronics and the Consumables categories.
Gross profit in the third quarter of fiscal 2012 increased 8.4% to $845.3 million compared with $779.8 million in the third quarter of fiscal 2011.
Gross profit, as a percentage of net sales, was 35.8% in the quarter compared to 36.2% in the third quarter of fiscal 2011.
As a percentage of sales, the impact of stronger sales of lower-margin consumables, higher markdowns and increased inventory shrinkage were partially offset by higher markups resulting from the Company’s continued investments in private brands, global sourcing and price management capabilities, and lower freight expense.
Selling, general and administrative (SG&A) expenses, as a percentage of net sales, were 27.4% in the third quarter of fiscal 2012 compared with 27.7% in the third quarter of fiscal 2011.
As a percentage of net sales, lower insurance expense and lower store labor expenses were partially offset by higher legal expenses.
Operating profit increased 8.2% to $199.4 million for the third quarter of fiscal 2012 as compared to $184.4 million in the third quarter of fiscal 2011.
As a percentage of net sales, operating profit was 8.4% in the third quarter of fiscal 2012 as compared to 8.6% in the third quarter of fiscal 2011.
The income tax rate in the third quarter of fiscal 2012 was 35.8% as compared to 37.5% in the third quarter of fiscal 2011.
The lower tax rate was primarily a result of changes in uncertain tax positions and lower state income taxes.
The Company’s inventory at May 26, 2012, was $1.39 billion compared with $1.13 billion at May 28, 2011.
Average inventory per store at the end of the third quarter of fiscal 2012 was approximately 17% higher than the average inventory per store at the end of the third quarter of fiscal 2011.
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 first three quarters of fiscal 2012, capital expenditures were $391.4 million compared with $230.3 million in the first three quarters of fiscal 2011.
The increase in capital expenditures was primarily a result of increased new store openings, expenditures related to the construction of the Company’s 10
distribution center, and investments related to store renovations, relocations and expansions.
During the first three quarters of fiscal 2012, the Company opened 287 new stores, closed 43 stores and renovated, relocated or expanded 583 stores.
During the third quarter, the Company completed a sale-leaseback transaction for 137 stores with net proceeds, after transaction expenses, of $177.6 million.
In June 2012, the Company completed an additional sale-leaseback transaction for another 137 stores with net proceeds of $178.8 million, after transaction expenses.
During the first three quarters of fiscal 2012, the Company repurchased approximately 1.7 million shares of its common stock for a total cost of $91.6 million.
As of May 26, 2012, the Company had the authorization to purchase up to an additional $245.7 million of its common stock.
For the fourth quarter, the Company expects that comparable store sales will increase between 5% and 7% and that earnings per diluted share will be between $0.71 and $0.81, compared with $0.66 in the fourth quarter of fiscal 2011.
For the full year, the Company expects that earnings per diluted share will be between $3.60 and $3.70, compared with $3.12 in fiscal 2011.
The Company's outlook for fiscal 2012 is based on the following assumptions which may or may not prove valid:
An increase in net sales of between 9% and 10%;
An increase in comparable store sales of around 5%;
Approximately 450-500 new store openings and 60-80 store closings;
Gross margin pressure for the full year;
SG&A expense growth of between 6% and 7%;
An effective income tax rate between 36.5% and 37%;
Weighted average diluted shares of approximately 118 million; and
Capital expenditures of between $650 million and $675 million to support new store openings, store renovations, purchases of stores, merchandising initiatives, and expansion of the Company’s supply chain.
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 Reports 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 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 2012.
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 (800) 779-6561 for domestic US calls and (517) 308-9046 for international calls at least 10 minutes before the call is scheduled to begin.
The passcode for the conference call is FAMILY DOLLAR.
A live webcast of the conference call with accompanying slides can be accessed at the following link:
A replay of the webcast will be available at the address noted above after 2:00 p.m. ET,
June 28, 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 7,200 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 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
Kiley F. Rawlins, CFA
FAMILY DOLLAR STORES
FAMILY DOLLAR CORPORATE