Family Dollar Stores, Inc.
) recently warned that earnings would decline in fiscal 2014
compared with the prior year as the retail environment remained
challenging. This Zacks Rank #5 (Strong Sell) is facing tough
market conditions as its core customers who shop for value haven't
seen the benefits of the economic recovery.
Family Dollar is a discount retailer operating 8,000 stores in
rural and urban locations in 46 states.
Lackluster First Quarter
On Jan 9, Family Dollar reported fiscal first quarter 2014 results
which missed the Zacks Consensus Estimate by a penny.
Sales rose 3.2% to $2.5 billion from $2.4 billion in the year ago
period. This was in line with its previously announced guidance for
Consumables led the quarter with an increase of 4.7%, as
refrigerated and frozen food, health aids and tobacco boosted the
Comparable store sales fell 2.8% as customer transactions
Warned on the Full Year
Family Dollar expects the challenges it faced in the first quarter
to impact it the rest of the fiscal year. The economy is not great
for its core customer and promotions remain intense.
Comparable store sales for December, which is in the second
quarter, fell 3% due to a decline in customer transactions.
For the second quarter, comparable store sales are expected to
decline in the low-single-digit range.
For the full year, earnings per share are now forecast to be in the
range of $3.25 to $3.55 compared with $3.83 it made in fiscal 2013,
which also had one more week.
Analysts didn't waste any time in cutting their estimates.
14 out of 15 estimates were lowered for fiscal 2014 after the
announcement. The Zacks Consensus Estimate fell to $3.42 from
$3.99. That's a 10% decrease in earnings compared with fiscal 2013.
Investors have been fleeing the shares for the last few months.
Even still, the shares aren't that cheap. It trades with a forward
P/E of 19.8.
The discount retailers, as an industry, are in bad shape. They all
have customers that are still struggling. The industry ranks in the
bottom 4% of Zacks 265 industries.
But if you MUST own one in your portfolio, check out
). It is a Zacks Rank #3 (Hold) and is expected to see double digit
earnings growth this year and next.
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DOLLAR GENERAL (DG): Free Stock Analysis Report
FAMILY DOLLAR (FDO): Free Stock Analysis Report
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