An expanding number of consumers in search of value and an improved shopping experience at Family Dollar propelled the company to its strongest first-quarter same-store sales increase in 12 years, but profits for the period and the earnings outlook were below analysts’ estimates.
“Our comparable-store sales increase of 6.9% is the best first quarter result we’ve delivered in more than 12 years,” said Family Dollar chairman and CEO Howard Levine
“Clearly, our investments to improve the shopping experience in our stores are positioning us well to serve a growing number of Family Dollar customers.”
Overall, sales for the period which ended on the Saturday following Thanksgiving, or Nov. 27, increased 9.5% to nearly $2 billion and profits increased 9.9% to $74.3 million. Earnings per share increased 18.4% to 58 cents comparedwith 49 cents the prior year, but that figure was below the 61 cents analysts forecast. In addition, the company’s second-quarter guidance, which calls for earnings in the range of 92 to 97 cents, was below analysts’ estimates of $1.
While the company said it attracted more shoppers during its first quarter, average transaction size was flat. Sales were strongest in such consumable categories as food and candy, which in turned pressured gross margins that declined slightly to 36% from 36.1% the prior year. The company managed to leverage its expenses, though, as a result of the sales momentum so selling, general and administrative costs declined slightly to 29.9% compared to 30.1% the prior year.
Family Dollar continued to add stores at a rapid clip during the quarter with 85 units opened and 18 closed, compared to the prior year’s first quarter when 43 stores were opened and 33 were closed. In addition, 173 stores were remodeled during the period.
The pace of new store activity will continue through the remainder of the company’s fiscal year with a total 300 new units planned along with 80 to 100 closings, which should come close to pushing the retailer’s store count above the 7,000 mark.