Billionaire activist investor Carl Icahn has set his eyes on the
Family Dollar Stores Inc.
). As per a filing with the Securities and Exchange Commission
(SEC), Icahn, along with his affiliates, bought a 9.4% stake in the
discount store retailer for nearly $265.8 million. Following the
development, shares rose 10% in after market trading on Jun 6,
After taking on the bellwethers like
) in the past couple of years, Icahn now targets Family Dollar and
is likely to push the company's management to implement strategic
changes and if required might seek board representation as well.
Icahn is not the only big shareholder in the company. Other high
profile investors like Nelson Peltz's Trian Fund Management LP and
John Paulson's Paulson & Co. owe 7.4% and 5.7% stake in Family
Following the disclosure, Family Dollar issued a statement that it
was open for talks with all shareholders as it is constantly
looking to maximize shareholder value.
Family Dollar has been in troubled waters for sometime now. The
tepid economic recovery and increasing competition from other big
brick and mortar retailers along with online giants has affected
sales and profitability. The company posted a 6.1% decline in
sales and a 6.7% drop in gross margin for the second quarter of
Consequently, Family Dollar announced a number of measures to
improve its operational and financial performances. Management
intends to reduce prices of 1,000 basic items, optimize cost
structure by lowering the headcount and close 370 underperforming
outlets and be more rationale on new store opening to reap higher
return on investment.
Notably, store portfolio rationalization is in stark contrast to
its peers like
Dollar General Corp.
), which is on a store expansion drive. Dollar general intends to
openabout 700 new stores in fiscal 2014.
Though Icahn has not disclosed his plans as regards to improving
the shareholder value, but as per the filing, Family Dollar's
condition is similar to that of the other troubled companies that
benefited from Icahn's involvement, which helped to generate
substantial return for the stakeholders.
Currently, Family Dollar carries a Zacks Rank #5 (Strong Sell).
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