Wednesday, discount retail chain operator Family Dollar Stores, Inc. (FDO) reported a 7.1% rise in its third-quarter profit on higher net sales and expense control. Quarterly earnings per share grew 15% on lower share count and topped analysts' estimate by six cents, while top line came in line with the consensus. Family Dollar also provided fourth-quarter earnings forecast and lifted its fiscal 2008 earnings outlook, both above analysts' projections. The company also raised its comparable store sales growth forecast for the month of June.
The Charlotte, North Carolina-based company's net income grew to $64.67 million from $60.37 million in the previous year. Earnings per share were $0.46, up from $0.40 in the same quarter last year.
On average, 15 analysts surveyed by First Call/Thomson Financial expected earnings of $0.40 per share for the third quarter.
Family Dollar's quarterly net sales increased 2.9% to $1.70 billion from $1.65 billion in the prior-year quarter. Wall Street analysts had a consensus revenue estimate of $1.70 billion for the quarter.
Comparable store sales edged up 0.1%, reflecting an increase in average customer transaction, which offset lower customer traffic, as measured by the number of register transactions.
Commenting on the results, Howard Levine, Family Dollar Chairman and Chief Executive Officer, said, "We have made significant investments in our business to enable us to manage better in these uncertain times and we are seeing tangible benefits. In addition, our intense focus on controlling expenses and mitigating inventory risk has resulted in net income growth and an improvement in inventory productivity, despite flat comparable store sales."
For the nine-month period, Family Dollar earned $179.92 million, or $1.28 per share, down from $205.04 million, or $1.36 per share, in the prior-year period. Sales rose 0.3% to $5.22 billion from $5.20 billion a year ago. The company said that the recent period included one less week of sales compared with the first three quarters of fiscal 2007. Comparable store sales decreased 0.3%.
Further, Family Dollar said that month-to-date sales are above its original plan, and it now expects comparable store sales to rise about 6% for the month of June. The company's previous forecast for June comparable store sales was 2% to 4% growth. For the month of May, comparable store sales were up 1.8%.
For the fourth quarter, the company expects earnings per share between $0.30 and $0.35, higher than $0.26 per share reported in the previous year. Analysts estimate earnings of $0.29 per share for the quarter, with expectations ranging from $0.25 per share to $0.32 per share.
Further, sales of consumables are expected to continue to drive comparable store sales that are projected to rise 4% to 6% in the fourth quarter. While the federal stimulus package is expected to benefit the company's target customer, the magnitude of the impact is difficult to predict, Family Dollar said.
Based on the current expectations for the fourth quarter, Family Dollar now expects fiscal 2008 earnings per share in the range of $1.58 to $1.63, higher than its previous forecast range of $1.50 to $1.60. For fiscal 2007, the company reported earnings of $1.62 per share. Meanwhile, analysts expect earnings of $1.51 per share for full-year 2008.
The company also expects a slight increase in its full-year comparable store sales and estimates to open about 200 new stores and close approximately 75 stores.
Among others in the sector, Wal-Mart Stores Inc. (WMT) is slated to announce its second-quarter results on August 14. Analysts are of the view that the company will earn $0.82 per share in the quarter on sales of $101.12 billion.
Another rival, Dollar Tree Inc. (DLTR) is expected to release its second quarter earnings in late August or early September. Analysts expect the company to report a profit of $0.36 per share, up from last year's $0.33 per share.
In early May, brokerage Deutsche Bank reiterated Family Dollar at 'Buy' and raised share price target to $25 from $22. FDO is trading at $21.70, up $1.41, on a volume of 6.41 million shares.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.