Family Dollar Net Plummets in Q3
MATTHEWS, N.C.-Family Dollar posted a third-quarter drop of 32.9 percent, to $81.1 million, as its chairman and CEO, Howard Levine, proclaimed that the company's restructuring initiatives are on track.
In the company's statement on its results for the quarter, which ended on May 31, Levine said its move to permanently lower its prices is "resonating with customers." He added that Family Dollar has also made savings from its work force reductions, and is on track to close about 370 underperforming stores by the end of the fiscal year. The company announced these efforts when it reported its second-quarter results in April.
The quarter's sales reflected what Levine characterized as "the economic challenges facing our core customer and an intense competitive environment." Net sales increased 3.3 percent to $2.7 billion, although same-store sales were down 1.8 percent. Compared to the second quarter, Levine added, same-store sales rose in all four of Family Dollar's merchandise categories.
Partly due to its restructuring efforts, gross margin was down 42 basis points to 34.3 percent. Selling, general and administrative expenses increased 8.9 percent in dollars and 149 basis points as a percentage of sales, to 28.9 percent--due to higher store-occupancy, labor and advertising costs.
In June, activist investor Carl Icahn disclosed that he had bought 9.4 percent of Family Dollar's stock. Later in the month, he called for a sale of the retailer in a letter to Levine, which was filed with the U.S. Securities and Exchange Commission.
Family Dollar said it expects same-store sales to be flat in the fourth quarter. For the fiscal year, sales are projected for a gain in the low single digits, while same-store sales are expected to log in a decline in the low single digits.