Zacks Investment Research downgraded
Family Dollar Stores Inc.
) to a Zacks Rank #5 (Strong Sell) on Jan 12, 2013.
Why the Downgrade?
Family Dollar has witnessed a sharp downward revision in
estimates after posting lower-than-expected first-quarter fiscal
2013 results on Jan 3, 2013, that prompted management to take a
conservative stance on its future earnings.
The quarterly earnings of 69 cents a share missed the Zacks
Consensus Estimate of 74 cents but inched up 1.5% from 68 cents
earned in the prior-year quarter. The earnings also came in at
the lower-end of the previously provided guidance range of 69
cents to 78 cents due to gross margin pressure coupled with
anticipated headwinds related to insurance expenditure.
The increase in sales of lower margin merchandises weighed
upon the company's gross margin that contracted approximately 120
basis points to 34.1% during the quarter under review. Increased
discounts and higher inventory shrinkage also hurt the margins.
For fiscal 2013, management expects gross margin to remain under
Management anticipates earnings between $1.18 and $1.28 for
the second quarter and in the band of $3.95 to $4.20 per share
for fiscal 2013. The company had earlier forecasted fiscal 2013
earnings between $4.10 and $4.40 per share.
The Zacks Consensus Estimate for the second and third quarters
of fiscal 2013 dropped 11.5% and 2.5% to $1.23 and $1.19 per
share, respectively, over the past 30 days. Moreover, for fiscal
2013 and 2014, the Zacks Consensus Estimate fell by 6.1% and 7.3%
to $3.99 and $4.47 per share, respectively, over the same time
Other Stocks to Consider
Not all discount store chains are performing as
disappointingly as Family Dollar.
Big Lots Inc.
Ross Stores Inc.
The TJX Companies Inc.
) look promising and are expected to continue with their upbeat
performances in the coming quarters. These stocks hold a Zacks
Rank #2 (Buy).
BIG LOTS INC (BIG): Free Stock Analysis
FAMILY DOLLAR (FDO): Free Stock Analysis
ROSS STORES (ROST): Free Stock Analysis
TJX COS INC NEW (TJX): Free Stock Analysis
To read this article on Zacks.com click here.