Matthews, NC—Continuing on a trend seen with its rival dollar stores, Family Dollar today reported that its second quarter profit rose 10.5% as shoppers paid more visits—and bought more at its 7,100 stores.
For the quarter ended Feb. 25, Family Dollar posted earnings of $136.4 million, or $1.15 a share, compared with $123.2 million, or 98 cents a share, a year ago.
Net sales increased 8.6% to $2.46 billion from $2.26 billion a year earlier. Comparable store sales were up 4.5% thanks to “increased customer traffic, as measured by the number of register transactions, and a slight increase in the average customer transaction value.” Sales were strongest in consumables, seasonal and electronics categories.
The results were better than analysts’ average forecast, which earnings of $1.13 a share, on sales of $2.50 billion.
‘Our Value and Convenience Continues to Resonate’
“I’m very pleased to report that we delivered our 16th consecutive quarter of double-digit earnings per share growth. Our investments to improve the shopping experience and broaden our customer appeal are gaining momentum and continue to drive higher returns for our shareholders,” said Howard Levine, chairman/ceo. “Our strategy to provide value and convenience continues to resonate in this economic environment. As we execute against our strategic plan, our store teams are working hard to expand our merchandise assortment to better meet our customer’s needs and drive further market share gains.”
Part of the increase in merchandise assortment includes more consumerables as the retailer strives to become a “one-stop shop” for lower to moderate income shoppers.
That doesn’t come without a price, however. Gross margin edged down to 34.9% from 35.7% due to higher markdowns and lower margins on consumables, “which was mostly offset by higher purchase mark-ups resulting from the company’s continued investments in private brands, global sourcing and price management capabilities.”
Inventory rose 15.4% to $1.22 billion from $1.06 billion in the prior year, reflecting its investment in key consumable merchandise.
The company plans to open about 450 to 500 new stores, but expects to shut down around 80 to 100 locations this year.
For its third quarter, the company forecast earnings of between $1.01 and $1.11 a share with comparable store sales increasing 5% to 7%. Analysts’ average estimate expects $1.06 per share.