Family Dollar To Halt Expanision Plans, Lower Prices, Close Stores

Family Dollar To Halt Expanision Plans, Lower Prices, Close Stores
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The reversal in plans came today following disappointing second quarter reporting that saw a 6% decline in revenue year-over-year. While those numbers were largely in line with Wall Street estimates, it didn’t stop the company from announcing that it would close nearly 400 stores this year. Second quarter net income declined from $140 million in the second quarter of 2013 to $90.9 million in the corresponding quarter of 2014.

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Closures and downsizing for Family Dollar

Consequently, earnings came in at $0.80 per share versus $1.20 in the corresponding 2013 quarter and $0.10 below the consensus estimate.

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“Our second quarter results did not meet our expectations,”  Howard Levine, Family Dollar Stores, Inc. (NYSE:FDO) chairman and CEO, said in a statement Thursday morning. “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.”

The numbers

The company saw same-store sales decline 3.8% and now plans to lower the prices of around 1,000 items while, like its customers, finding additional ways to save money. The closures are set to begin immediately and should result in a gain in operating profit of $40 to $45 million as soon as third quarter 2014. Additionally, the company’s 2015 expansion plans have been reined in significantly.

Excluding restructuring charges, the company expects same store sales to continue to fall in the low single digits while EPS is expected between $0.85 and $0.95 per share. With the closures, Family Dollar Stores, Inc. (NYSE:FDO) expects fourth quarter same store sales declines to stop and expect earnings per share to fall between $0.38 and $0.48. For the year, including restructuring charges, earnings are expected between $2.55 and $2.75 per share.

After the disappointing earnings call and the expected closings of nearly 400 stores, Family Dollar Stores, Inc. (NYSE:FDO) fell in pre-market trading and opened at $59.18. The stock has slid steadily in today’s trading is currently down $1.57 to $57.47, a loss of 2.71%

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