Discount Retailer Hits Targets, but EPS Forecast Disappoints (FDO)

Family Dollar Stores Inc. (NYSE: FDO) reported fiscal fourth-quarter 2012 adjusted diluted earnings per share (EPS) of $0.75 on revenue of $2.36 billion. In the same period a year ago, the discount retailer reported diluted EPS of $0.66 on revenue of $2.13 billion. Fourth-quarter results compare to the Thomson Reuters consensus estimates for EPS of $0.75 and $2.36 billion in revenue.

For the full fiscal year, the company reported adjusted diluted EPS of $3.64 on revenue of $9.33 billion. That compares with fiscal 2011 EPS of $3.12 on sales of $8.55 billion. The Thomson Reuters consensus estimates called for EPS of $3.64 on revenue of $9.33 billion.

Family Dollar’s chairman and CEO said:

This year, as we work to drive further benefit from the investments we made in fiscal 2012, we will focus on enhancing the shopping experience in our stores, increasing inventory productivity, improving store-level processes, and driving greater profitability.

Regarding the company’s outlook for fiscal 2013, the CEO had this to say:

Our financial goals over the next three to five years are to consistently deliver: five to seven percent net new store growth; mid-single-digit comp sales growth; operating margin expansion, and double-digit earnings per share growth. Our plans for fiscal 2013 align nicely with these long-term goals.

As guidance, Family Dollar said it plans to increase fiscal year same-store sales by 4% to 6%, open 500 new stores and close 70 to 90, and spend $600 to $650 million in capex. For the first quarter, the company expects same-store sales to rise by 4% to 6% and diluted EPS to total $0.69 to $0.78, compared with $0.68 in the first quarter a year ago. The Thomson Reuters consensus estimate calls for EPS of $0.78 on revenue of $2.37 billion.

For the fourth quarter, same-store sales rose 5.4% from an increase in traffic and a larger average transaction. Gross profit fell slightly from 34% in the same period a year ago to 33.8%. The company attributed the drop to “the impact of stronger sales of lower-margin consumables and increased inventory shrinkage … largely offset by higher markups, lower markdowns and lower freight expense.”

Family Dollar’s shares are inactive in premarket trading so far this morning, having closed at $66.00 last night. The 52-week range is $49.17 to $74.73. Thomson Reuters had a consensus analyst price target of $70.38 before today’s report.

Paul Ausick