Family Dollar to Cut Work Force, Close Stores
MATTHEWS, N.C.-Declaring that "we hold ourselves accountable for improving our performance," Family Dollar Chairman and CEO Howard Levine said the retailer will reduce its work force and close about 370 underperforming stores, in the wake of second-quarter results which were below the company's expectations.
Net income in the quarter, which ended on March 1, plummeted by 35.2 percent to $90.9 million. Net sales dropped 6.1 percent to $2.7 billion, including a 3.8 percent decline in same-store sales.
Gross margin was off 21 basis points to 33.2 percent, due to increased sales of lower-margin consumables and higher markdowns. Selling, general and administrative expenses rose 1.6 percent in dollars and 313 basis points as a percentage of sales, to 28.1 percent.
The layoffs and store closings were among a number of initiatives Family Dollar will undertake to improve its financials. Although the company did not state how many people would be laid off, it said it would take actions to cut corporate overhead and realign key organizational functions. It will also slow new-store growth beginning in fiscal 2015, reducing the number of new-store openings from the planned 525 to between 350 and 400. It will also lower prices on almost 1,000 basic items in an effort to offer "more compelling values to customers."
Levine said, "Once complete, our work-force reduction efforts and store closures are expected to result in $40 million to $45 million of annualized operating profit benefit, beginning in the third quarter of fiscal 2014. We are confident that these steps will position Family Dollar to deliver stronger returns for our shareholders."