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Last Update: 03-Jan-13 07:52 ET
Family Dollar shares fall 5% following miss on earnings and downside guidance
Family Dollar (FDO $60.90 -3.14) reported first quarter earnings of $0.69 per share, $0.06 worse than the Capital IQ consensus of $0.75. Co guided to $0.69-0.78 versus the $0.79 consensus on October 3; revenues rose 12.8% year/year to $2.42 billion versus the $2.38 bln consensus. Sales were strongest in the Consumables category, which increased 18.5% during the quarter, driven primarily by strong growth in tobacco, food and health and beauty aids. Comparable store sales for the quarter increased 6.6% as a result of increased customer traffic and an increase in the average customer transaction value. Gross profit for the quarter increased 9.1% to $826.8 mln, or 34.1% of net sales, compared to $757.6 million, or 35.3% of net sales, in the first quarter of fiscal 2012. As a percentage of sales, the impact of stronger sales of lower-margin consumables, higher markdowns and increased inventory shrinkage was partially offset by higher markups and lower freight expense. During Q1, the co repurchased ~0.4 million shares of its common stock for a total cost of $25.0 million. As of Nov 24, 2012, the co had the authorization to purchase up to an additional $120.8 million of its common stock. "Early results from our sales-driving initiatives exceeded our expectations in the first quarter, resulting in more gross margin pressure than anticipated. This mix pressure, combined with expected headwinds from insurance expense, resulted in earnings that were at the low end of our guidance." The company issued downside guidance for the second quarter with EPS of $1.18-1.28 versus the $1.40 consensus, with comps +4-5%. The company issued downside guidance for fiscal year 2013 with lowered EPS to $3.95-4.20 from $4.10-4.40 versus the $4.25 consensus, comps +4-6%. "The holiday selling season proved to be more challenging than we expected as customers faced increasing financial uncertainty. Comparable stores sales for December increased about 2.5%, driven primarily by strong, double-digit sales of Consumables. Discretionary categories continued to be pressured, reflecting ongoing consumer caution."
