Family Dollar Stores (FDO) reports weak profit amid economic slowdown

Posted Apr 4th 2008 11:58AM by Eliza Popescu
Filed under: Earnings Reports, Forecasts, Bad News, Consumer Experience, Family Dollar Stores (FDO), Recession

Shares of retailer Family Dollar Stores Inc

. (NYSE:FDO) have been taking a hit in early trading as the company slashed its full-year earnings outlook amid tumbling market conditions.The retailer was able to post better-than-expected earnings numbers but this was not enough to reassure investors who pushed the stock down over 1%.

Family Dollar Stores announced that its second quarter profit had dropped 30% to $63.3 million, down from $90.5 million reported in the same period a year ago when the company benefited from an extra week of holiday sales. The retailer posted quarterly earnings of 45 cents a share, slightly higher the 42 cents a share that analysts expected.

The company posted a drop of 6% in its second-quarter revenue to $1.83 billion, down from $1.95 billion a year earlier. Analysts forecast revenue of $1.84 billion in the quarter, according to Thomson Financial. The drop in revenue came as the retailer had to face a difficult consumer environment brought by the U.S. housing market slowdown, high gas prices and credit crisis.

Looking at same stores sales (sales at stores open at least 12 months), the company expects a decline in a range of 4% and 5% for the month of March. Family Dollar blamed limited discretionary spending that came as a reaction to the difficult economic environment.

The retailer is not too optimistic about the future and anticipates further pressure on consumer spending. A rebound for the company's earnings is expected only at the end of this year when "the pending government stimulus package will bring some much needed relief."

Back in January, Family Dollar had cut its earnings forecast and now it did it again. As a result, the company now expects 2008 earnings in a range between $1.50 and $1.60 a share, while analysts predicted a profit of $ 1.50 a share. For the third quarter, Family Dollar anticipates earnings of 39 cents to 44 cents a share, while analysts, on average, were waiting for earnings of 43 cents.

Eliza Popescu is a financial writer for the online investment advisory service Investor's Observer.

Tags: consumer spending, ConsumerSpending, earnings, Family Dollar Stores, FamilyDollarStores, fdo, forecast, inthenews, retailer