Family Dollar Stores on Thursday reported a slight dip in comparable store sales and a big drop in profits during its fiscal first quarter.
Net earnings for the period, which ended Nov. 29, tumbled 47% to $41.4 million on sales of $2.6 billion, a 2.7% increase. Comparable store sales decreased by 1.2%. Officials said the Charlotte-based discounter was feeling the pain of a $50 million investment in lower everyday prices announced last year, while its sales mix continued to skew toward lower-margin consumables, increasing to 75.8% of the chain’s total sales, vs. 74.9% in the same period last year.
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“As expected, the first quarter of fiscal 2015 was very challenging, as we continued our transition from a very promotional merchandising strategy to a more everyday low price strategy," Howard R. Levine, chairman and CEO, said in a statament. "During the quarter, gross margin continued to be pressured by the impact of our pricing investments, as well as strong growth of lower-margin consumable categories, including food and tobacco. Our team did a good job of controlling expenses; however, ongoing topline challenges and continued margin pressures impacted our net profitability.
“As we look to the rest of fiscal 2015, we are focused on driving more profitable sales growth, and the second quarter is off to a solid start. Comparable store sales in December increased 1.2%, with fewer in-season promotional markdowns than last year and growth in customer traffic.”
Family Dollar continues to await resolution of deal to sell itself — either to rival Dollar Tree, whose offer has ben approved by Family Dollar’s board and management, or to Dollar General, which has made a competing offer. Shareholders are expected to vote on whether to approve the Dollar Tree offer Jan. 22.
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