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FDO Stock: Family Dollar Misses Again, Blames Old Man Winter

FDO blames tough winter and shorter calendar, but makes suspicious long-term store changes

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Family Dollar (FDO) missed on its fiscal second quarter 2014 earnings report for the second consecutive quarter this morning, blaming much of its poor performance on a shorter calendar period and tough winter weather, while promising major changes to its stores going forward.

Family DollarFDO stock was initially down 3.5% from yesterday’s closing price of $59.07 to $57 in pre-market trading, but bounced back before to open about 0.5% higher this morning. Shares of rivals Dollar Tree (DLTR) and Dollar General (DG) were slightly lower in early trading.

The results of the fiscal second quarter were rather dismal. Earnings per share for Family Dollar came in at 80 cents — down from $1.21 in Q2 2013, and below expectations of 90 per share. Net sales were $2.72 billion, compared to $2.9 billion for Q2 2013, and below the street’s expectations of $2.78 billion. Net income fell from $140 million to $90.9 million year-over -year. Same-store sales were down 3.8% from a year ago.

Family Dollar was quick to point out that the second quarter of fiscal 2014 had only 13 weeks, compared to 14 weeks for the second quarter of fiscal 2013. FDO estimated an impact of about $189 million in sales and 7 cents of earnings losses from the one-week difference. The company also said that bad weather accounted for about 5 cents of losses. But even adding these numbers to the bottom line, the quarter would still have been weaker than the comparable 2013 quarter.

Howard R. Levine, FDO’s chairman and CEO was blunt in assessing FDO’s poor performance. He said:

“Our second quarter results did not meet our expectations. The 2013 holiday season was challenged by a more promotional competitive environment and a more financially constrained consumer. In addition, like many retailers, our second quarter results were significantly impacted by severe winter weather, which resulted in numerous store closings, disrupted merchandise deliveries and higher than expected utility and store maintenance expenses.”

Mr. Levine added that company executives hold themselves accountable for the poor results and that numerous changes would be made to FDO stores over the remainder of 2014, including:

  • Lowering prices on almost 1000 basic store items to become more competitive
  • A reduction in corporate overhead and a re-alignment of organizational functions
  • Closing some 370 underperforming stores and cutting jobs over the rest of the year
  • Reducing its projected new store openings in 2015 from 525 to 350-400.  FDO had opened 244 new stores during the first half of fiscal 2014, and it closed 22.

So, what’s going on with FDO? Well…

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