Family Dollar Stores, Inc. (NYSE: FDO) today reported that for the first
quarter of fiscal 2014 ended November 30, 2013, net sales increased to
$2.5 billion and net income per diluted share for the quarter was
$0.68.
“Today, we reported sales and earnings for the first quarter of fiscal
2014 that were in-line with our previously provided guidance. As
expected, comparable stores sales were pressured, as we anniversaried
strong consumable sales growth last year. In addition, our core
customers continued to face economic uncertainties, and the promotional
environment intensified,” said Howard R. Levine, Chairman and CEO.
“While the top line was pressured, we expanded gross margin and managed
inventory levels well. In addition, we continued to make progress in our
longer-term initiatives. We opened 126 new stores and renovated,
relocated or expanded 179 stores. We also expanded our penetration of
private brands, increased our percentage of direct imports, and improved
our store manager retention.”
Fiscal 2014 First Quarter Results
Net sales for the first quarter ended November 30, 2013 increased 3.2%
to $2.5 billion compared to $2.4 billion in the first quarter of fiscal
2013 ended November 24, 2012. Sales were strongest in the Consumables
category, which increased 4.7% during the quarter, driven primarily by
strong growth in refrigerated and frozen food, health aids, and tobacco.
Comparable store sales for the comparable 13-week period ended November
30, 2013 decreased 2.8% as a result of decreased customer transactions
and a slight decrease in the average customer transaction value.
Gross profit for the quarter increased 3.6% to $856.8 million, or 34.3%
of net sales, compared to $826.8 million, or 34.1% of net sales, in the
first quarter of fiscal 2013. As a percentage of sales, higher markups
and lower freight expense were partially offset by the impact of
stronger sales of lower-margin consumables, increased inventory
shrinkage, and higher markdowns.
Selling, general and administrative (SG&A) expenses, as a percentage of
net sales, were 29.5% in the quarter compared to 28.9% in the first
quarter of fiscal 2013. SG&A expenses decreased 1.4% on an average
per-square-foot basis. The expense de-leverage during the quarter was
primarily driven by the decrease in comparable store sales. As a
percentage of net sales, higher store occupancy costs and store payroll
were partially offset by lower advertising, insurance and incentive
compensation costs.
The effective income tax rate in the quarter was 35.4% as compared to
36.4% in the first quarter of fiscal 2013. The decrease in the effective
tax rate in the first quarter of fiscal 2014, as compared to the first
quarter of fiscal 2013, was due primarily to foreign tax benefits
associated with our global sourcing efforts and an increase in federal
jobs tax credits partially offset by an increase in uncertain tax
positions.
Net income for the quarter was $78.0 million compared with net income of
$80.3 million for the first quarter of fiscal 2013.
The Company’s merchandise inventories at November 30, 2013, increased
3.4% to $1.65 billion compared with $1.59 billion at November 24, 2012.
Average inventory per store at the end of the quarter was approximately
2.7% lower than the average inventory per store at the end of the first
quarter of fiscal 2013.
In the quarter, capital expenditures were $112.5 million compared with
$196.4 million in the first quarter of fiscal 2013. In the first quarter
of fiscal 2014, the Company spent $42.8 million related to new stores;
$30.7 million on our store renovation program; $20.2 million related to
corporate and technology investments; and $14.3 million on existing
stores.
During the quarter, the Company opened 126 new stores, closed one store,
and renovated, relocated or expanded 179 stores.
In the first quarter of fiscal 2014, the Company repurchased
approximately 1.8 million shares of its common stock for a total cost of
$125.0 million. As of November 30, 2013, the Company had the
authorization to purchase up to an additional $245.8 million of its
common stock.
Management Changes
The Company announced today that Michael K. Bloom, President and Chief
Operating Officer, has left the Company to pursue other interests. The
Company will conduct a search for a new President and Chief Operating
Officer.
“Since joining Family Dollar in 2011, Mike has been a valued part of our
team,” said Levine. “We appreciate his contributions to the Company and
wish him all the best in his future endeavors.”
Outlook
“Many of the top-line challenges we faced in the first quarter,
including a challenged consumer and an intensified promotional
environment, have continued to impact our business. Comparable stores
sales for December decreased about 3%, driven primarily by a decline in
customer transactions. In addition, we reacted to softness in
discretionary categories by leveraging promotions more than we
originally planned,” said Levine. “Reflecting our December results, our
expectations that the macroeconomic trends will continue, and the impact
of investments we plan to make to strengthen our value proposition, we
have lowered our earnings expectations for the second quarter of fiscal
2014 and the full year.”
“While we have made meaningful progress to improve our execution, our
financial performance has not met our expectations,” said Levine. “We
have a great business model and ample growth opportunity, and I know we
can do better.”
“As we move forward, we are taking steps to drive stronger revenue
growth and better financial returns. Our immediate focus is on
re-accelerating customer traffic, strengthening our value proposition,
and continuing to enhance the relevancy of our assortment. We also
intend to maintain our focus on reducing costs while also selectively
investing in new stores, our renovation program and supply chain
improvements to position our long-term growth.”
“While a difficult operating environment will likely challenge earnings
growth in the near-term, I am confident that these investments will
improve our competitiveness, strengthen customer loyalty, increase our
market share and position us to deliver stronger earnings growth in
early fiscal 2015.”
For the second quarter of fiscal 2014, the Company expects that
comparable store sales will decline in the low-single-digit range and
that earnings per diluted share will be between $0.85 and $0.95 per
share compared with $1.21 per share in the second quarter of fiscal
2013. Consistent with the National Retail Federation calendar, the
second quarter of fiscal 2013 included 14 weeks, and the Company
estimates this extra week contributed approximately $189 million in
sales and $0.07 of earnings per diluted share.
For the 52-week year ending August 30, 2014, the Company expects that
earnings per diluted share will be between $3.25 and $3.55, compared
with $3.83 in fiscal 2013, which was a 53-week year.
The Company's outlook for fiscal 2014 is based on the following
assumptions which may or may not prove valid:
-
A low-to-mid single digit increase in net sales, excluding the impact
of the extra week in fiscal 2013;
-
A low-single digit decline in comparable store sales;
-
Approximately 525 new store openings and 80 store closings;
-
Flat gross profit, as a percentage of sales;
-
SG&A expense de-leverage based on our comparable store sales outlook;
-
An effective income tax rate between 36.0% and 36.5%;
-
Capital expenditures of between $450 million and $500 million; and
-
Approximately $250 million of share repurchases.
Cautionary Statements
Certain statements contained in this press release are “forward-looking
statements” that are subject to the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995. These forward-looking
statements address certain plans, activities or events which the Company
expects will or may occur in the future and relate to, among other
things, the state of the economy, the Company’s investment and financing
plans, net sales, comparable store sales, store openings and closings,
income tax rates, capital expenditures, cost of sales, SG&A expenses,
earnings per diluted share, dividends and share repurchases. Various
risks, uncertainties and other factors could cause actual results to
differ materially from those expressed in any forward-looking statement.
Consequently, all of the forward-looking statements made by the Company
in this and in other documents or statements are qualified by factors,
risks and uncertainties, including, but not limited to, those set forth
under the headings titled “Cautionary Statement Regarding
Forward-Looking Statements” and “Risk Factors” in the Company’s most
recent Annual Report on Form 10-K filed with the Securities and Exchange
Commission up to the date of this release.
Readers are cautioned not to place undue reliance on these
forward-looking statements, which speak only as of the date of this
press release. The Company does not undertake to update or revise these
forward-looking statements even if experience or future changes make it
clear that projected results expressed or implied in such statements
will not be realized, except as may be required by law.
Earnings Conference Call Information
The Company plans to host a conference call with investors today,
January 9, 2014, at 10:00 a.m. ET to discuss the results. The Company
will also provide an update on various business initiatives and discuss
plans and expectations for fiscal 2014. After some prepared remarks by
management, participants will have an opportunity to ask questions. The
Company’s responses to questions, as well as other matters discussed
during the conference call, may include information that has not been
disclosed previously.
If you wish to participate, please call (800) 890-0881 for domestic US
calls and (719) 325-2295 for international calls at least 10 minutes
before the call is scheduled to begin. The passcode for the conference
call is 3827795 or “FAMILY DOLLAR.”
A live webcast of the conference call with accompanying slides can be
accessed at the following link.
http://investor.familydollar.com/investors-relations/default.aspx
A replay of the webcast will be available at the address noted above
after 11:00 a.m. ET, January 9, 2014.
About Family Dollar
For more than 54 years, Family Dollar has been providing value and
convenience to customers in easy-to-shop neighborhood locations. Family
Dollar’s mix of name brands and quality, private brand merchandise
appeals to shoppers in more than 8,000 stores in rural and urban
settings across 46 states. Helping families save on the items they need
with everyday low prices creates a strong bond with customers, who often
refer to their neighborhood store as “my Family Dollar.” Headquartered
in Matthews, North Carolina, just outside of Charlotte, Family Dollar is
a Fortune 300, publicly held company with common stock traded on the New
York Stock Exchange under the symbol FDO. For more information, please
visit www.familydollar.com.
|
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
|
CONSOLIDATED STATEMENTS OF INCOME
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the First Quarter Ended
|
(in thousands, except per share amounts)
|
|
November 30, 2013
|
|
% of Net Sales
|
|
November 24, 2012
|
|
% of Net Sales
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
$
|
2,499,691
|
|
100.00
|
%
|
|
$
|
2,421,688
|
|
100.00
|
%
|
|
|
|
|
|
|
|
|
|
Cost of sales
|
|
|
1,642,850
|
|
65.72
|
%
|
|
|
1,594,894
|
|
65.86
|
%
|
|
|
|
|
|
|
|
|
|
Gross profit
|
|
|
856,841
|
|
34.28
|
%
|
|
|
826,794
|
|
34.14
|
%
|
|
|
|
|
|
|
|
|
|
Selling, general and administrative expenses
|
|
|
736,522
|
|
29.46
|
%
|
|
|
699,825
|
|
28.90
|
%
|
|
|
|
|
|
|
|
|
|
Operating profit
|
|
|
120,319
|
|
4.81
|
%
|
|
|
126,969
|
|
5.24
|
%
|
|
|
|
|
|
|
|
|
|
Investment income
|
|
|
58
|
|
0.00
|
%
|
|
|
75
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
Interest expense
|
|
|
6,923
|
|
0.28
|
%
|
|
|
7,122
|
|
0.29
|
%
|
|
|
|
|
|
|
|
|
|
Other income
|
|
|
7,406
|
|
0.30
|
%
|
|
|
6,362
|
|
0.26
|
%
|
|
|
|
|
|
|
|
|
|
Income before income taxes
|
|
|
120,860
|
|
4.83
|
%
|
|
|
126,284
|
|
5.21
|
%
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
42,833
|
|
1.71
|
%
|
|
|
46,005
|
|
1.90
|
%
|
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
78,027
|
|
3.12
|
%
|
|
$
|
80,279
|
|
3.32
|
%
|
|
|
|
|
|
|
|
|
|
Net income per common share - basic
|
|
$
|
0.68
|
|
|
|
$
|
0.69
|
|
|
Weighted average shares - basic
|
|
|
114,581
|
|
|
|
|
115,521
|
|
|
|
|
|
|
|
|
|
|
|
Net income per common share - diluted
|
|
$
|
0.68
|
|
|
|
$
|
0.69
|
|
|
Weighted average shares - diluted
|
|
|
115,084
|
|
|
|
|
116,197
|
|
|
|
|
|
|
|
|
|
|
|
Dividends declared per common share
|
|
$
|
0.26
|
|
|
|
$
|
0.21
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
|
CONSOLIDATED BALANCE SHEETS
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
November 30,
|
|
November 24,
|
(in thousands, except per share and share amounts)
|
|
2013
|
|
2012
|
Assets
|
|
|
|
|
|
|
Current assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
170,465
|
|
$
|
112,267
|
Short-term investment securities
|
|
|
4,007
|
|
|
9,560
|
Restricted cash and investments
|
|
|
33,844
|
|
|
80,884
|
Merchandise inventories
|
|
|
1,645,676
|
|
|
1,592,068
|
Deferred income taxes
|
|
|
37,786
|
|
|
71,557
|
Prepayments and other current assets
|
|
|
159,735
|
|
|
75,082
|
Total current assets
|
|
|
2,051,513
|
|
|
1,941,418
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
1,759,485
|
|
|
1,636,189
|
Investment securities
|
|
|
20,565
|
|
|
23,489
|
Other assets
|
|
|
76,619
|
|
|
86,350
|
|
|
|
|
|
|
|
Total assets
|
|
$
|
3,908,182
|
|
$
|
3,687,446
|
|
|
|
|
|
|
|
Liabilities and Shareholders' Equity
|
|
|
|
|
|
|
Current liabilities:
|
|
|
|
|
|
|
Short-term borrowings
|
|
$
|
242,000
|
|
$
|
209,000
|
Current portion of long-term debt
|
|
|
16,200
|
|
|
16,200
|
Accounts payable
|
|
|
757,624
|
|
|
752,231
|
Accrued liabilities
|
|
|
317,725
|
|
|
316,347
|
Income taxes
|
|
|
22,155
|
|
|
32,618
|
Total current liabilities
|
|
|
1,355,704
|
|
|
1,326,396
|
|
|
|
|
|
|
|
Long-term debt
|
|
|
484,112
|
|
|
500,158
|
Other liabilities
|
|
|
292,447
|
|
|
277,738
|
Deferred gain
|
|
|
214,489
|
|
|
154,611
|
Deferred income taxes
|
|
|
22,506
|
|
|
75,950
|
Commitments and contingencies
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders' equity:
|
|
|
|
|
|
|
Preferred stock, $1 par; authorized and unissued 500,000 shares
|
|
|
—
|
|
|
—
|
Common stock, $.10 par; authorized 600,000,000 shares
|
|
|
12,055
|
|
|
11,993
|
Capital in excess of par
|
|
|
316,362
|
|
|
282,957
|
Retained earnings
|
|
|
1,617,716
|
|
|
1,290,436
|
Accumulated other comprehensive loss
|
|
|
(1,922)
|
|
|
(1,795)
|
Common stock held in treasury, at cost
|
|
|
(405,287)
|
|
|
(230,998)
|
Total shareholders' equity
|
|
|
1,538,924
|
|
|
1,352,593
|
|
|
|
|
|
|
|
Total liabilities and shareholders' equity
|
|
$
|
3,908,182
|
|
$
|
3,687,446
|
|
|
|
|
|
|
|
|
|
|
|
|
|
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
|
|
CONSOLIDATED STATEMENTS OF CASH FLOWS
|
|
(Unaudited)
|
|
|
|
|
|
|
|
|
|
For the First Quarter Ended*
|
|
(in thousands)
|
|
November 30, 2013
|
November 24, 2012
|
|
Cash flows from operating activities:
|
|
|
|
|
|
Net income
|
|
$
|
78,027
|
|
|
$
|
80,279
|
|
|
Adjustments to reconcile net income to net cash provided by
operating activities:
|
|
|
|
Depreciation and amortization
|
|
|
61,734
|
|
|
|
57,175
|
|
|
Amortization of deferred gain
|
|
|
(4,205
|
)
|
|
|
(2,857
|
)
|
|
Deferred income taxes
|
|
|
1,402
|
|
|
|
17,919
|
|
|
Excess tax benefits from stock-based compensation
|
|
|
(5,244
|
)
|
|
|
(12,654
|
)
|
|
Stock-based compensation
|
|
|
5,530
|
|
|
|
4,413
|
|
|
Loss on disposition of property and equipment, including impairment
|
|
|
2,865
|
|
|
|
2,860
|
|
|
Changes in operating assets and liabilities:
|
|
|
|
|
|
Merchandise inventories
|
|
|
(178,661
|
)
|
|
|
(165,906
|
)
|
|
Prepayments and other current assets
|
|
|
1,828
|
|
|
|
(27,472
|
)
|
|
Other assets
|
|
|
1,057
|
|
|
|
(2,073
|
)
|
|
Accounts payable and accrued liabilities
|
|
|
27,876
|
|
|
|
10,003
|
|
|
Income taxes
|
|
|
30,671
|
|
|
|
761
|
|
|
Other liabilities
|
|
|
3,253
|
|
|
|
9,784
|
|
|
Net cash provided by (used in) operating activities
|
|
|
26,133
|
|
|
|
(27,768
|
)
|
|
|
|
|
|
|
|
Cash flows from investing activities:
|
|
|
|
|
|
Purchases of restricted and unrestricted investment securities
|
|
|
(2,529
|
)
|
|
|
(10,720
|
)
|
|
Sales of restricted and unrestricted investment securities
|
|
|
26,111
|
|
|
|
7,542
|
|
|
Net change in restricted cash
|
|
|
373
|
|
|
|
46,009
|
|
|
Net proceeds from sale-leaseback
|
|
|
570
|
|
|
|
1,132
|
|
|
Capital expenditures
|
|
|
(112,467
|
)
|
|
|
(196,386
|
)
|
|
Proceeds from dispositions of property and equipment
|
|
|
165
|
|
|
|
162
|
|
|
Net cash used in investing activities
|
|
|
(87,777
|
)
|
|
|
(152,261
|
)
|
|
|
|
|
|
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Revolving credit facility borrowings
|
|
|
686,000
|
|
|
|
568,000
|
|
|
Repayment of revolving credit facility borrowings
|
|
|
(444,000
|
)
|
|
|
(374,000
|
)
|
|
Repayment of long-term debt
|
|
|
(16,200
|
)
|
|
|
(16,200
|
)
|
|
Repurchases of common stock
|
|
|
(125,038
|
)
|
|
|
(24,980
|
)
|
|
Change in cash overdrafts
|
|
|
3,964
|
|
|
|
43,138
|
|
|
Proceeds from exercise of employee stock options
|
|
|
11,072
|
|
|
|
15,578
|
|
|
Excess tax benefits from stock-based compensation
|
|
|
5,244
|
|
|
|
12,654
|
|
|
Payment of dividends
|
|
|
(29,932
|
)
|
|
|
(24,227
|
)
|
|
Net cash provided by financing activities
|
|
|
91,110
|
|
|
|
199,963
|
|
|
|
|
|
|
|
|
Net change in cash and cash equivalents
|
|
|
29,466
|
|
|
|
19,934
|
|
|
Cash and cash equivalents at beginning of period
|
|
|
140,999
|
|
|
|
92,333
|
|
|
Cash and cash equivalents at end of period
|
|
$
|
170,465
|
|
|
$
|
112,267
|
|
|
|
|
|
|
|
|
*Certain reclassifications of the amounts for fiscal 2013 have
been made to conform to the presentation for fiscal 2014.
|
|
|
|
|
|
|
|
|
|
FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
|
Selected Additional Information
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NET SALES BY CATEGORY:
|
|
|
|
|
|
|
|
|
For the First Quarter Ended
|
|
|
November 30,
|
|
November 24,
|
|
|
(in thousands)
|
|
2013
|
|
2012
|
|
% Change
|
Consumables
|
|
$
|
1,873,096
|
|
|
$
|
1,789,285
|
|
|
4.7
|
%
|
Home products
|
|
|
240,496
|
|
|
|
242,335
|
|
|
-0.8
|
%
|
Apparel and accessories
|
|
|
171,524
|
|
|
|
178,026
|
|
|
-3.7
|
%
|
Seasonal and electronics
|
|
|
214,575
|
|
|
|
212,042
|
|
|
1.2
|
%
|
TOTAL
|
|
$
|
2,499,691
|
|
|
$
|
2,421,688
|
|
|
3.2
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
STORES IN OPERATION:
|
|
|
|
|
|
|
|
|
For the First Quarter Ended
|
|
|
|
November 30,
|
|
November 24,
|
|
|
|
|
2013
|
|
2012
|
|
|
Beginning Store Count
|
|
|
7,916
|
|
|
|
7,442
|
|
|
|
New Store Openings
|
|
|
126
|
|
|
|
125
|
|
|
|
Store Closings
|
|
|
(1
|
)
|
|
|
(1
|
)
|
|
|
Ending Store Count
|
|
|
8,041
|
|
|
|
7,566
|
|
|
|
|
|
|
|
|
|
|
Total Square Footage (000s)
|
|
|
69,100
|
|
|
|
64,927
|
|
|
|
Total Selling Square Footage (000s)
|
|
|
57,807
|
|
|
|
54,245
|
|
|
|
INCREASE
|
|
|
6.6
|
%
|
|
|
6.9
|
%
|
|
|
|
|
|
|
|
|
|
Copyright Business Wire 2014