Family Dollar's great quarter still disappoints
How many retailers can claim double-digit gains in sales and profit in this economy?
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.
More from Top Stocks
- Food companies face rising dairy prices
- Winners and losers in health law decision
- Takeaways from Google's developer conference
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.)
MORE ON MSN MONEY
DATA PROVIDERS
Copyright © 2013 Microsoft. All rights reserved.
Quotes are real-time for NASDAQ, NYSE and AMEX. See delay times for other exchanges.
Fundamental company data and historical chart data provided by Thomson Reuters (click for restrictions). Real-time quotes provided by BATS Exchange. Real-time index quotes and delayed quotes supplied by Interactive Data Real-Time Services. Fund summary, fund performance and dividend data provided by Morningstar Inc. Analyst recommendations provided by Zacks Investment Research. StockScouter data provided by Verus Analytics. IPO data provided by Hoover's Inc. Index membership data provided by SIX Financial Information.
Japanese stock price data provided by Nomura Research Institute Ltd.; quotes delayed 20 minutes. Canadian fund data provided by CANNEX Financial Exchanges Ltd.
LATEST POSTS
All hail the bull market, which ended the week with a big rally. But it also is starting to look a little like 1987, which suffered an epic blow-out.
FIDELITY VIEWPOINTS
- How to sell covered calls - Fidelity Investments
- Savvy year-end tax moves to consider now - Fidelity Investments
- Seven ways to prepare for tax changes
- Five reasons an annual review is crucial - Fidelity Investments
- Take a look at mid caps now - Fidelity Investments
- State of the sector: Health care - Fidelity Investments
VIDEO ON MSN MONEY
ABOUT
Top Stocks provides analysis about the most noteworthy stocks in the market each day, combining some of the best content from around the MSN Money site and the rest of the Web.
Contributors include professional investors and journalists affiliated with MSN Money.
Follow us on Twitter @topstocksmsn.

