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In order to knock off its competitors, Family Dollar Stores (NYSE: FDO) recently added cigarettes and other tobacco products (6,600 stores are currently selling tobacco), Pepsi drinks, gift cards, magazines and some other goods to its chains in recent months. The addition acted as a catalyst and bought momentum in its recent quarter ending performance in which its total sales rose by 12.7% to $2.4 billion and comp store sales by 6.6%.
Outflow for capital expenditures in the first quarter amounted to $196.4 million for the purpose of opening 125 new stores. This expansion helped Family Dollar see strong sales for the quarter in the consumables category, an increase of 18.5% over last year. Net income for the quarter remained at par over the last year’s income at $80.3 million compared to $80.4 million, and earnings per diluted share was $0.69 compared to $0.68 per share last year. A rigorous marketing initiative boosted its marketing expense to 10 basis points as a percentage of sales. Inventory at each store at the end of the quarter was about 15% higher than last year at $1.6 billion compared with $1.3 billion at the end of the first quarter of last year. Moreover, the income tax rate of 36.4% in the quarter was lower as compared with 37.4% of last year.
Down the Line
As we know that the recovery of economic downturn is still unstable, shoppers are prone to find the best deal even more. Family Dollar, with its low cost options, still remains successful in pulling in budget-constrained consumers amidst the weak economic recovery. For fiscal 2013, it expects growth of 13% to 15% in net sales and an increase of 12.6% to 20.9% in earnings per share, i.e. between $3.95 and $4.20. Further it is expected that earnings per diluted share in the second quarter of 2013 will be between $1.18 and $1.28. Moreover, in order to enhance its market share, Family Dollar intends to focus on both consumables and discretionary categories. Further during the second half of fiscal 2013, it looks forward to introduce another large wave of Family Wellness SKUs in its basket.
Other Sprinters on the field
Dollar Tree (NASDAQ: DLTR) has announced that it intends to expand its distribution center in Marietta, Oklahoma. The expansion plan is scheduled to start in February 2013 and should be completed in the autumn of 2013 in which it has planned to construct an additional 400,000 square feet infrastructure. The total cost of the expansion is expected to be approximately $25 million which will be in addition to its approximately 7,500 stores in 45 states.
Dollar General (NYSE: DG) is the largest small-box discounter, with over 10,000 stores in 40 states, and has further expansion plans to open more than 600 new stores down the line in a year. It declared its financial results for the third quarter ended, Nov. 2, 2012, in which Sales increased by 10.3% to $3.96 billion and demonstrated quarterly revenue growth of 10.3% and EPS growth of 24%. The results were beyond expectations. The expansion plans indicate that the company should have a bright future thereby giving competition to Family Dollar.
Wal-Mart Stores (NYSE: WMT) a retail store operator worldwide, expects its revenues to go up by 5.5% in Fiscal year 2014. Moreover it is also expected to see strong square footage growth of 3.5% and same store growth of 2% in Fiscal Year 2013. Wal-Mart has more than 4,480 stores in the United States, and has further appointed Lev Khasis as president and chief executive of New Formats for Wal-Mart International, to develop new store concepts that can be deployed across markets. The strong projections are a serious threat for Family Dollar.
This was its best quarterly performance since the last two years and further it remains on track to deliver double-digit earnings growth for the full year. The investments are taking place to expand refrigerated and frozen foods which are expected to be value drivers going forward. Since the company's prospects look bullish, I would suggest buying for the long haul.
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