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Family Dollar Q3 Earnings Flat

MATTHEWS, N.C. — Family Dollar grew sales and market share during the third quarter but earnings were flat and margins were down, officials of the discounter here said Wednesday.

“It’s tough out there right now for our customers and their spending remains constrained,” Howard Levine, chairman and chief executive officer, said in a conference call discussing results of the quarter, which ended June 1.

Separately, Family Dollar on Wednesday said that Paul White, executive vice president and chief merchandising officer, has left the company to pursue other interests. While the company completes a search for a replacement for White, Michael K. Bloom, president and chief operating officer, will assume executive responsibility for merchandising. The company also said that it has hired Jason Reiser to the position of senior vice president of merchandising, succeeding John Scanlon, who retired earlier this year. Reiser most recently was vice president, merchandising, for health and family care at Wal-Mart Stores’ Sam’s Club division.

“In our ongoing efforts to better meet the needs of our core customer and growing trade-in customer, we are excited to welcome Jason to the team,” Bloom said in a statement. “Jason brings more than 17 years of experience in discount retail, and I am confident that his experience and familiarity with our customers will be an enormous asset to our leadership team.”

Lower-margin consumables sales increased, helping Family Dollar raise overall sales by 9% and comparable-store sales by 2.9% during the quarter. But a concurrent decline in discretionary categories caused gross margins to decline by 114 basis points to 34.68% of sales. Officials said they expected those conditions would continue in the fourth quarter.

Net earnings totaled $341.4 million, essentially flat from the same period a year ago, on $2.6 billion in sales. Both sales and earnings were slightly above analyst estimates.

John Heinbockel, an analyst at Guggenheim Securities, New York, estimated that consumable comps improved by 9% in the quarter but were matched with a 9% decline in non-consumable categories. Heinbockel in a written report said he expected the company see improved results in the fourth quarter as consumer spending increases with warmer weather and the company cycles the margin impacts felt as it rolled out tobacco to stores a year ago.

“This year is proving to be more challenging than we had originally planned,” Levine said. “While we continue to invest for the long-term, we have adapted to the slower sales environment. Our team has repositioned the company by focusing on what we can control. We have taken a more aggressive stance on managing expenses. We’re controlling and improving inventory productivity.”


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