Family Dollar's great quarter still disappoints

How many retailers can claim double-digit gains in sales and profit in this economy?

By Kim Peterson Jun 28, 2012 5:29PM
Image: A bunch of dollar bills (© Tetra Images/Getty Images)Most companies would kill for the kind of numbers Family Dollar (FDO) reported Thursday, but still the stock fell. Shares closed down nearly 3% to $67.20 Thursday afternoon.

The numbers point to a great quarter. Profit rose 12%, revenue rose 10% and customer traffic rose 5%. Retail isn't giving those kinds of numbers lately, and yet still investors were disappointed.

But in this shaky economy, Wall Street thought Family Dollar's numbers would be a little higher. Analysts wanted to see profit of $1.07 a share (the company reported $1.06) on revenue of $2.37 billion (the company reported $2.36 billion). There's no reason for shares to be down so much with that slim miss.

Family Dollar's guidance set off some alarms as well. For the current quarter, the company said it expects a profit of 71 cents to 81 cents a share on sales growth of 5% to 7%. That works out to about sales of $2.24 billion to $2.28 billion. Analysts are looking for 77 cents a share on $2.36 billion.

Check out this video on what to buy and what to avoid at dollar stores.

Post continues below.
But full-year guidance looks pretty good. The company is expecting a profit of $3.60 to $3.70 a share (analysts are expecting $3.67) and sales growth of 9% to 10%. That works out to about $9.32 billion to $9.41 billion in sales (analysts are expecting $9.34 billion).

I think investors should be pleased as punch that Family Dollar can pull in these kinds of numbers in the current economy. But no, they took down the stock as well as those of other dollar stores. Dollar Tree (DLTR) fell 2.4% to close at $52.18, and Dollar General (DG) fell less than 1% to close at $53.73.

Analysts simply set their expectations too high. And some of them seemed to concede that after seeing Family Dollar's earnings. Analyst Mark Montagna of Avondale Partners kept his $77 price target on the stock, saying he expects the company to make progress in closing the sales and margin gap with Dollar General, Barron's reports.

Family Dollar has been trying to compete harder with other chains, and has added cigarettes, Pepsi drinks, magazines and more health and beauty items, Reuters reports.

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2Comments
Jun 29, 2012 12:07PM
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we stay away from this store, my family is a working american family and we try to buy american made products and all you will find here is made in china
Jun 29, 2012 4:47PM
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"Analysts wanted to see...."

Those words suggest that a company's first obligation is to the analysts rather than its own shareholders and customers, which isn't what I learned in economics class.  It occurs to me that all those Wall Street analysts can easily manipulate a stock's price just by overstating or understating their expectations. (Of course, if it CAN be done, then it probably IS being done.)
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