It comes as n
o surprise that the top performer among the stocks comprising the S&P 500 Index is a retailer focused on delivering quality products and services at a discount price.
Family Dollar Stores (NYSE: FDO) increased nearly 30% in 2008, compared with a decrease of 40% in the S&P 500.
Defying the expectations of gloomy analysts who are paralyzed by their inability to value companies during the last 12 months, and by short sellers who perceived a price drop following the high level performance in 2008, the stock is continuing its climb as we enter the 2009 trading year.
Family Dollar reported first quarter earnings Wednesday, which exceeded analysts' expectations and company projections.
Earnings for the period were up by 14%, with revenue increasing by 4.2% and same-store sales up a healthy 2.1%. Market reaction to the report is stunning, with FDO up more than 14% at the close.
Family Dollar CEO Howard Levine, son of founder and Chairman Emeritus Leon Levine, issued a forecast of continued growth for the next quarter and for all of 2009.
The company is now projecting earnings of $1.63 to $1.81 per share for fiscal year 2009. Earlier forecasts were in the range of $1.58 to $1.78. Projections of same-store sales growth for the year were also increased from a range of 1%-3% to 2%-4%.
FDO combines conservative leadership with a consumer-friendly neighborhood store environment, and a product mix appealing to cost-conscious consumers to deliver value and a positive shopping experience. With minimal exposure to price-volatile electronic and apparel inventory, company performance is not likely to be adversely affected by a prolonged economic downturn.
FDO has more than 6,000 locations in 44 contiguous states. The company has effectively managed its rapid growth during the last five years, having opened more than half of its stores during this period.
Other discounters in the same category as Family Dollar include Dollar General, which is privately held, Wal-Mart (NYSE: WMT) and Dollar Tree (NASDAQ: DLTR).
While earnings per share at FDO are lower than either of the two publicly traded competitors at $1.66, compared with $2.41 at DLTR and $3.46 at WMT, FDO's gross margin exceeds either of the others. And it's trading at a multiple to earnings slightly below DLTR and above WMT.
Family Dollar also compares favorably with its business sector in revenue per employee ($279,000 versus $186,000) and net earnings per employee ($9,323 versus $4,146). With a current ratio of 1.26, a long-term debt-to-equity ratio of under 20, and interest coverage of nearly 58 (compared to a sector average of 2.71), FDO is in a strong capital position with the capacity for significant future growth.
Louis Navellier's PortfolioGrader Pro, which offers free ratings for nearly 5,000 Wall Street stocks, rates FDO an A, or Strong Buy.
Jamie Dlugosch is a contributor to NavellierGrowth.com.
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Reader Comments (Page 1 of 1)
1-08-2009 @ 2:31PM
BHarrison said...
Well, let's not kid our selves too much . . . the market is still too unstable and volitle for anyone to be confident about what is going to occurin 2009.
From my perspective, there simply is too little INTEGRITY in the markets . . . Congress still hasn't drafted, passed or implemented any regulations or effective "oversight" to ensure any INTEGRITY in the markets, have they?
Weeks after week, there are "new disclosures" of "new losses' for major corporations, previously the "best of the best". Obviously there was little, if any, "integrity" in their previous financial reports, right? What about the "integrity" of their financial auditing firms?
There simply is "NO INTEGRITY" in the markets or the corporations . . . itis still a "no man's land" of potential fraudulent losses. Now we are evolving into losses from the dwonturn of business activity due to the Deep Recession that we are in.
On top of that, there is virtually "no interests" being paid on "bank cash ".investments . . . why should the banks pay us interests when they can get the money "for free" from the Fed? And why should investors invest in a market when there is little, if any RoI even on risky investments in a declining market.
It has become quite a quandary for business and government . . . and for the American people too. They want us to spend and invest; but there is no RoI and a helluva lot of HIGH RISKS in all of the questionable investments. They want us to spend and invest; but "we'd better hold onto what we have" until all of this bottoms out, right?
The GREEDY and CORRUPT Harvard/Princeton MBAs and PhDs, and our INEPT, INCOMPETENT, and otherwise CORRUPT Congress have REALLY made a mess of our economy, and our standard of living.
Congress is bailing out the corrupt CEOs and corporations; and they are "gaming" the recovery process and squeezing the public's credit availability. So far, with over $350 Billion bailout monies having been injected into the system, there is very little discernable results.
When the hedge fund and other fund managers prefer to "invest" (sic. park their money) in ZERO INTERESTS T-Bills, then we KNOW that the makrets are REALLY in BAD SHAPE, and have no integrity. These fund managers are the "insider" professionals who know what is going on . . . if they don't have faith and confidence in the markets, then why would anyone else?