Family Dollar Stores (NYSE: FDO), like Dollar Tree (NASDAQ: DLTR), is benefiting from the soft economy. Consumers love paying low prices, so they flock to these retail business models like moths to a flame. And judging by Family Dollar's Q4 report, people are still having a great time saving money.
Net income increased over 13% to 43 cents per share, which was two pennies higher than Wall Street's forecasts, according to our earnings preview. Unfortunately, sales weren't so great. Total sales went up 2.6%, and same-store sales saw a mere 1% gain. I would have expected higher growth in the comps metric.
But you know what? I think I'll give a pass on that. The press release does mention changes made on the sales floor, and intimated that they may have affected the revenue picture in the fourth quarter. It does happen. Whenever a retailer goes through a transformation, it sometimes is reasonable to assume that data will improve over time. The top line met expectations, though, so shareholders should keep that in mind.
I appreciated the expansion seen in the gross margin, and I enjoyed the full fiscal year results. Outlook seems to be okay, too. As far as I can tell, there still should be excitement surrounding Family Dollar and its bargain-hunter appeal, even in the face of competition from big brands like WalMart (NYSE: WMT) and Target (NYSE: TGT).
Unfortunately, I didn't like Wednesday's price action. The market sold Family Dollar on the news, dropping the stock by almost 1%. No, it wasn't the biggest sell-off ever, but I guess investors were concentrating more on the negatives of the Family Dollar story than on the positives.
I'm hesitant about buying Family Dollar right now. I'd wait for a further pullback before taking on shares of the company. However, check out Sam Collins' technical look at the stock from the beginning of September. It gives traders more context about recent price movement.
Disclosure: I don't own any company mentioned; positions can change without notice.
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Reader Comments (Page 1 of 1)
10-08-2009 @ 8:14PM
timmy said...
Yeah not exciting sales, but you know everything - *everything* - is down these days. Although Dollar Tree is still performing well in all categories.