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MATTHEWS, N.C. — Profits fell by 66% at Family Dollar Stores Inc. as the discount retailer absorbed restructuring costs related to store closings and legal expenses associated with competing takeover bids from its dollar store rivals.
Profits fell by 66% at Family Dollar Stores Inc. as the discount retailer absorbed restructuring costs related to store closings and legal expenses associated with competing takeover bids from its dollar store rivals.
Sales rose 4.5% to $2.6 billion in the retailer’s fiscal fourth quarter. Sales at stores open at least one year were up 0.3%, compared with the prior-year period, the company said Friday.
Sales were strongest in the consumables, seasonal and electronics categories, company officials noted. Consumables sales were led by strength in lower-margin frozen food and tobacco, while seasonal sales were driven by strength in toys. Apparel sales continued to improve.
But profits fell to $35 million, down from $102 million a year earlier, as Family Dollar paid $65 million in inventory write-downs and restructuring charges as it executed its plan to shutter 375 underperforming stores. The company also spent more than $9 million in the period on merger-related costs.
Net income in the fiscal year through August 30 was $2.49 per share, compared with $3.83 per share in the prior-year period, a 64.5% year-on-year decline. Full-year comparable-store sales fell 2.1%, the company said.
"Our core customer is still struggling," Howard Levine, the company’s chairman and chief executive officer, said in a conference call with analysts. "Our focus is back on that core customer, making sure that we’re offering her the great values that we have with the investment in price, along with the investment in great values on the discretionary side."
Family Dollar earlier this year lowered prices on more than 1,000 items to try to woo back shoppers. Levine has acknowledged that the retailer had alienated customers by deviating from its everyday-low price strategy.
Levine also said that the takeover fight between rivals Dollar General Corp. and Dollar Tree Inc. for control of Family Dollar was taking a toll.
"The uncertainty in the disruption for our team is significant," Levine said. "It’s having an impact on our results with all this uncertainty, but in light of that I’m extremely proud of our team. The dedication, hard work and commitment to improving our results is still there, and at the end of the day we have a lot of customers to take care of. We have a business to run, and it’s our job to stay focused on that."
In July Family Dollar agreed to be acquired by Dollar Tree for $74.50 a share in cash and stock, or $8.5 billion. But rival Dollar General has since made a hostile $80-per-share offer totaling $9.1 billion as it tries to break up the deal and acquire Family Dollar, which operates 8,000 stores in 46 states.
Dollar General recently extended the deadline on its tender offer to Family Dollar shareholders from October 8 until the end of this month.
