Family Dollar Stores said Thursday that it would close 370 underperforming stores and slow plans for new store growth as sales and earnings plunged during the fiscal second quarter.
The Matthews, N.C.-based discounter also said it would make a "significant investment" to lower prices on 1,000 items in stores and would move to reduce costs through layoffs at corporate headquarters. The company said sales for the quarter ended March 1 declined by 6.1% to $2.7 billion, while same-store sales fell by 3.8%. Gross profits were down 6.7% to 33.2% of net sales; and net earnings decreased by 35.1% to $90.9 million. The company said a highly promotional holiday season, constrained consumer spending and poor weather affected results.
"Notwithstanding the macro-economic pressure, competitive environment and severe weather, we are not satisfied with our results, and we hold ourselves accountable for improving our performance,” Howard Levine, chairman and CEO, said in a statement. “To that end, we have initiated an in-depth business review to identify opportunities to strengthen our value proposition, increase operational efficiencies and improve financial performance.”
Family Dollar said the workforce reduction efforts and store closures are expected to result in $40 million to $45 million of annualized operating profit benefit, beginning in the third quarter of fiscal 2014. In 2015, Family Dollar will reduce the pace of new store growth from a planned 525 this year to 350 to 400 next year.
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