Family Dollar Stores Inc
. (
FDO
), an operator of a self-service retail discount store chain, is
slated to report its third-quarter 2012 financial results on June
28, 2012. The current Zacks Consensus Estimate for the quarter
stands at $1.06 a share, indicating an estimated year-over-year
increase of about 16.5%. Revenue, as per the Zacks Consensus
Estimate, is $2.4 billion.
Second-Quarter Synopsis
Family Dollar's quarterly earnings of $1.15 per share exceeded
the Zacks Consensus Estimate by a couple of cents, and jumped 17.3%
from 98 cents earned in the comparable prior-year quarter.
The company posted a year-over-year increase of 8.6% in revenue
to $2.5 billion, reflecting sales growth across Consumables (up
12.9%) and Seasonal and Electronics (up 9.4%) segments, offset by
Apparel and Accessories (down 5.9%) and Home Products (down 0.5%).
However, total revenue fell short of the Zacks Consensus Estimate
of $2.46 billion.
Family Dollar expects earnings to be in the range of $1.01 to
$1.11 for the third quarter and $3.55 to $3.75 per share for fiscal
2012.
Management forecasts third-quarter comparable store sales to
rise between 5% and 7%, and fiscal 2012 comparable store sales to
climb between 5% and 6%. Family Dollar, which faces stiff
competition from
Wal-Mart Stores Inc
. (
WMT
) and
Dollar General
Corporation
(
DG
), expects fiscal 2012 net sales to increase in the range of 9% to
10%.
Earnings Estimate Revisions - Overview
Estimates haven't moved for the upcoming quarter, indicating a
lack of major catalysts during the quarter.
Agreement of Estimate Revisions
Among the 21 analysts providing estimates for the quarter, none
revised their estimates either upward or downward in the last 30
days. For fiscal 2012, 1 analyst revised his or her estimate
upward, while none lowered.
Magnitude of Estimate Revisions
The Zacks Consensus Estimate for the quarter therefore remained
stable over the last 30 days. The analysts remain constructive on
the stock based on the company's growth potential and brand value.
However, they expect margins to remain soft as consumers are
spending on basic necessities, such as food, which carries lower
margins. Estimates inched up a penny to $3.67 for fiscal 2012.
Mixed Surprise History
With respect to earnings surprises, Family Dollar has topped as
well as missed the Zacks Consensus Estimate over the last four
quarters in the range of negative 3.2% to positive 3.1%. The
average remained at positive 0.6%.
Our View
Family Dollar's strategic initiatives to enhance merchandising,
marketing and store operations have resulted in persistent growth
in both its top and bottom lines. In order to boost market share,
Family Dollar intends to focus on both consumable and discretionary
categories.
Further, the company has effective price and inventory
management, cost control, private label offering, and expanded
operating hours to drive sales and margin trends.
Moreover, the company's point-of-sale technology (credit card
and food stamp acceptance) and store realignment initiatives better
positions it to increase traffic and meet customer demand while
enriching the in-store shopping experience.
However, customers remain sensitive to macroeconomic factors
including interest rate hikes, increase in fuel and energy costs,
credit availability, unemployment levels, and high household debt
levels, which may negatively impact their discretionary spending,
and in turn, the company's growth and profitability.
Currently, we have a long-term Neutral recommendation on the
stock. However, Family Dollar holds a Zacks #2 Rank, which
translates into a short-term Buy rating.
DOLLAR GENERAL (DG): Free Stock Analysis Report
FAMILY DOLLAR (FDO): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis
Report
To read this article on Zacks.com click here.
Zacks Investment
Research