Earnings per diluted share increase 24.2% to $0.77
Net income increases 19.0%
Operating profit margin increases 98 basis points
Jul. 7, 2010 (Business Wire) -- Family Dollar Stores, Inc. (NYSE: FDO) today reported that net income per diluted share for the third quarter of fiscal 2010 ended May 29, 2010, increased 24.2% to $0.77 compared with $0.62 for the third quarter of fiscal 2009 ended May 30, 2009. Net income for the quarter increased 19.0% to $104.4 million compared with net income of $87.7 million for the third quarter of fiscal 2009.
“We continue to deliver greater value for our customers while improving their shopping experience in our stores. As a result, more and more consumers are finding the savings they need at Family Dollar,” said Howard R. Levine, Chairman and Chief Executive Officer. “Our revenue growth has accelerated nicely, and I am pleased to report our ninth consecutive quarter of double-digit earnings per share growth.”
As previously reported, sales for the third quarter of fiscal 2010 were approximately $1.997 billion, or 8.4% above sales of approximately $1.843 billion for the third quarter of fiscal 2009. Comparable store sales increased 7.0%. The increase in comparable store sales was a result of increased customer traffic, as measured by the number of register transactions. Average transaction value for the quarter was flat. Sales were strongest in the Seasonal and Electronics and Consumables categories.
The gross profit margin, as a percentage of sales, was 36.6% in the third quarter of fiscal 2010 compared to 36.2% in the third quarter of fiscal 2009. The improvement in gross profit, as a percentage of sales, was a result of reductions in markdown expenses and inventory shrinkage.
Selling, general and administrative (SG&A) expenses, as a percentage of sales, were 28.1% in the third quarter of fiscal 2010 compared with 28.7% in the third quarter of fiscal 2009. Most expenses, including occupancy costs, were leveraged during the quarter as a result of a strong comparable store sales increase and continued productivity improvements. In addition, insurance and incentive compensation expenses were lower during the quarter. These improvements more than offset investments related to expanded store operating hours and increased advertising.
The Company’s inventories at May 29, 2010, were $986.1 million, or 4.8% less than inventories of $1,035.3 million at May 30, 2009.
In the first three quarters of fiscal 2010, capital expenditures were $136.4 million compared with $103.2 million in the first three quarters of fiscal 2009. During the first three quarters of fiscal 2010, the Company opened 125 new stores and closed 56 stores.
During the first three quarters of fiscal 2010, the Company repurchased approximately 6.6 million shares of its common stock. As of May 29, 2010, the Company had authorization to purchase up to an additional $190.3 million of its common stock.
Outlook
“As we look to the fourth quarter, we expect that many of the trends we saw in the third quarter will continue. However, the environment remains challenging for consumers, and customers continue to buy close to need,“ said Mr. Levine. “The fourth quarter is off to a good start, with sales in comparable stores increasing an estimated 5.5% in June.”
For the fourth quarter, the Company expects that comparable store sales will increase 5% to 7% and that earnings per share will be between $0.46 and $0.51 compared with $0.43 in the fourth quarter of fiscal 2009.
For the full year, the Company expects that earnings per share will be between $2.53 and $2.58 compared with $2.07 in fiscal 2009.
Cautionary Statements
Certain statements contained in this press release are “forward-looking statements” that are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements address certain plans, activities or events which the Company expects will or may occur in the future and relate to, among other things, the state of the economy, the Company’s investment plans, net sales, comparable store sales, cost of sales, SG&A expenses, and earnings per diluted share. Various risks, uncertainties and other factors could cause actual results to differ materially from those expressed in any forward-looking statement. Consequently, all of the forward-looking statements made by the Company in this and in other documents or statements are qualified by factors, risks and uncertainties, including, but not limited to, those set forth under the headings titled “Cautionary Statement Regarding Forward-Looking Statements” and “Risk Factors” in the Company’s most recent Annual Report on Form 10-K and subsequent Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission up to the date of this release.
Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. The Company does not undertake to update or revise these forward-looking statements even if experience or future changes make it clear that projected results expressed or implied in such statements will not be realized, except as may be required by law.
Third Quarter Earnings Conference Call Information
The Company plans to host a conference call with investors today, July 7, 2010, at 10:00 A.M. EDT to discuss results for the third quarter and nine months ended May 29, 2010. The Company will also provide an update on various business initiatives and discuss expectations for the fourth quarter of fiscal 2010. After some prepared remarks by management, participants will have an opportunity to ask questions. The Company’s responses to questions, as well as other matters discussed during the conference call, may include information that has not been disclosed previously.
If you wish to participate, please call (800) 779-6561 for domestic US calls and (517) 308-9046 for international calls at least 10 minutes before the call is scheduled to begin. The passcode for the conference call is FAMILY DOLLAR.
There will also be a live webcast of the conference call that can be accessed at the following link:
http://www.familydollar.com/investors.aspx?p=irhome.
A replay of the webcast will be available at the same address noted above after 2:00 P.M. EDT, July 7, 2010. The replay of the webcast will be available until August 7, 2010.
About Family Dollar
Beginning with one store in 1959 in Charlotte, North Carolina, the Company currently operates more than 6,700 stores in 44 states. Family Dollar Stores, Inc., a Fortune 500 company, is based in Matthews, North Carolina, just outside of Charlotte and is a publicly held company with common stock traded on the New York Stock Exchange under the symbol FDO. For more information, please visit www.familydollar.com.
| FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME (Unaudited) | ||||||||||||||
| For the Third Quarter Ended | ||||||||||||||
| (in thousands, except per share amounts) | May 29, 2010 | % of Net Sales | May 30, 2009 | % of Net Sales | ||||||||||
| Net sales | $ | 1,996,989 | 100.00 | % | $ | 1,843,089 | 100.00 | % | ||||||
| Cost of sales | 1,266,761 | 63.43 | % | 1,175,897 | 63.80 | % | ||||||||
| Gross margin | 730,228 | 36.57 | % | 667,192 | 36.20 | % | ||||||||
| Selling, general and administrative expenses | 560,165 | 28.05 | % | 528,158 | 28.66 | % | ||||||||
| Operating profit | 170,063 | 8.52 | % | 139,034 | 7.54 | % | ||||||||
| Interest income | 432 | 0.02 | % | 879 | 0.05 | % | ||||||||
| Interest expense | 3,297 | 0.17 | % | 3,216 | 0.17 | % | ||||||||
| Income before income taxes | 167,198 | 8.37 | % | 136,697 | 7.42 | % | ||||||||
| Income taxes | 62,847 | 3.15 | % | 48,976 | 2.66 | % | ||||||||
| Net income | $ | 104,351 | 5.22 | % | $ | 87,721 | 4.76 | % | ||||||
| Net income per common share - basic | $ | 0.77 | $ | 0.63 | ||||||||||
| Weighted average shares - basic | 134,766 | 140,319 | ||||||||||||
| Net income per common share - diluted | $ | 0.77 | $ | 0.62 | ||||||||||
| Weighted average shares - diluted | 135,789 | 141,195 | ||||||||||||
| Dividends declared per common share | $ | 0.155 | $ | 0.135 | ||||||||||
| FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES | |||||||||||||
| CONSOLIDATED STATEMENTS OF INCOME | |||||||||||||
| (Unaudited) | |||||||||||||
| For the Three Quarters Ended | |||||||||||||
| (in thousands, except per share amounts) | May 29, 2010 | % of Net Sales | May 30, 2009 | % of Net Sales | |||||||||
| Net sales | $ | 5,910,125 | 100.00 | % | $ | 5,589,182 | 100.00 | % | |||||
| Cost of sales | 3,780,844 | 63.97 | % | 3,636,233 | 65.06 | % | |||||||
| Gross margin | 2,129,281 | 36.03 | % | 1,952,949 | 34.94 | % | |||||||
| Selling, general and administrative expenses | 1,668,196 | 28.23 | % | 1,587,425 | 28.40 | % | |||||||
| Operating profit | 461,085 | 7.80 | % | 365,524 | 6.54 | % | |||||||
| Interest income | 1,096 | 0.02 | % | 6,042 | 0.11 | % | |||||||
| Interest expense | 10,000 | 0.17 | % | 9,778 | 0.17 | % | |||||||
| Income before income taxes | 452,181 | 7.65 | % | 361,788 | 6.48 | % | |||||||
| Income taxes | 168,000 | 2.84 | % | 130,638 | 2.34 | % | |||||||
| Net income | $ | 284,181 | 4.81 | % | $ | 231,150 | 4.14 | % | |||||
| Net income per common share - basic | $ | 2.07 | $ | 1.65 | |||||||||
| Weighted average shares - basic | 136,977 | 140,044 | |||||||||||
| Net income per common share - diluted | $ | 2.06 | $ | 1.64 | |||||||||
| Weighted average shares - diluted | 137,734 | 140,629 | |||||||||||
| Dividends declared per common share | $ | 0.445 | $ | 0.395 | |||||||||
| FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES | |||||||||||
| CONSOLIDATED BALANCE SHEETS | |||||||||||
| (Unaudited) | |||||||||||
| As of | |||||||||||
| (in thousands, except per share and share amounts) | May 29, 2010 | May 30, 2009 | |||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 343,595 | $ | 296,058 | |||||||
| Investment securities | 101,192 | 33,500 | |||||||||
| Merchandise inventories | 986,061 | 1,035,259 | |||||||||
| Deferred income taxes | 72,356 | 95,627 | |||||||||
| Prepayments and other current assets | 53,856 | 54,711 | |||||||||
| Total current assets | 1,557,060 | 1,515,155 | |||||||||
| Property and equipment, net | 1,064,537 | 1,046,544 | |||||||||
| Investment securities | 151,897 | 171,000 | |||||||||
| Other assets | 28,122 | 24,616 | |||||||||
| Total assets | $ | 2,801,616 | $ | 2,757,315 | |||||||
| Liabilities and Shareholders' Equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 539,658 | $ | 462,631 | |||||||
| Accrued liabilities | 474,353 | 517,719 | |||||||||
| Income taxes | 29,790 | 18,160 | |||||||||
| Total current liabilities | 1,043,801 | 998,510 | |||||||||
| Long-term debt | 250,000 | 250,000 | |||||||||
| Deferred income taxes | 44,807 | 53,121 | |||||||||
| Income taxes | 40,944 | 30,974 | |||||||||
| Commitments and contingencies | |||||||||||
| Shareholders' equity: | |||||||||||
| Preferred stock, $1 par; authorized and | |||||||||||
| unissued 500,000 shares | |||||||||||
| Common stock, $.10 par; authorized | |||||||||||
| 600,000,000 shares | 14,647 | 14,535 | |||||||||
| Capital in excess of par | 238,950 | 205,253 | |||||||||
| Retained earnings | 1,611,830 | 1,346,527 | |||||||||
| Accumulated other comprehensive loss | (8,346 | ) | (10,433 | ) | |||||||
| 1,857,081 | 1,555,882 | ||||||||||
| Less: common stock held in treasury, at cost | 435,017 | 131,172 | |||||||||
| Total shareholders' equity | 1,422,064 | 1,424,710 | |||||||||
| Total liabilities and shareholders' equity | $ | 2,801,616 | $ | 2,757,315 | |||||||
| FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES | ||||||||||||
| CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||||||
| (Unaudited) | ||||||||||||
| For the Three Quarters Ended | ||||||||||||
| (in thousands) | May 29, 2010 | May 30, 2009 | ||||||||||
| Cash flows from operating activities: | ||||||||||||
| Net income | $ | 284,181 | $ | 231,150 | ||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||||
| Depreciation and amortization | 128,120 | 118,280 | ||||||||||
| Deferred income taxes | 11,333 | (3,236 | ) | |||||||||
| Excess tax benefits from stock-based compensation | (1,566 | ) | (577 | ) | ||||||||
| Stock-based compensation | 9,037 | 9,772 | ||||||||||
| Loss on disposition of property and equipment, | ||||||||||||
| including impairment | 5,115 | 9,535 | ||||||||||
| Changes in operating assets and liabilities: | ||||||||||||
| Merchandise inventories | 7,736 | (2,574 | ) | |||||||||
| Income tax refund receivable | 8,618 | 7,007 | ||||||||||
| Prepayments and other current assets | 5,312 | 3,471 | ||||||||||
| Other assets | (4,181 | ) | (288 | ) | ||||||||
| Accounts payable and accrued liabilities | (110,319 | ) | (61,312 | ) | ||||||||
| Income taxes | 31,053 | 11,961 | ||||||||||
| 374,439 | 323,189 | |||||||||||
| Cash flows from investing activities: | ||||||||||||
| Purchases of investment securities | (100,642 | ) | — | |||||||||
| Sales of investment securities | 17,506 | 8,650 | ||||||||||
| Capital expenditures | (136,362 | ) | (103,190 | ) | ||||||||
| Proceeds from dispositions of property and equipment | 1,031 | 714 | ||||||||||
| (218,467 | ) | (93,826 | ) | |||||||||
| Cash flows from financing activities: | ||||||||||||
| Payment of debt issuance costs | (651 | ) | (624 | ) | ||||||||
| Repurchases of common stock | (271,680 | ) | (38,456 | ) | ||||||||
| Change in cash overdrafts | 58,837 | (27,256 | ) | |||||||||
| Proceeds from exercise of employee stock options | 19,015 | 27,827 | ||||||||||
| Excess tax benefits from stock-based compensation | 1,566 | 577 | ||||||||||
| Payment of dividends | (58,354 | ) | (53,875 | ) | ||||||||
| (251,267 | ) | (91,807 | ) | |||||||||
| Net change in cash and cash equivalents | (95,295 | ) | 137,556 | |||||||||
| Cash and cash equivalents at beginning of period | 438,890 | 158,502 | ||||||||||
| Cash and cash equivalents at end of period | $ | 343,595 | $ | 296,058 | ||||||||
| FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES | |||||||||||
| Selected Additional Information | |||||||||||
| NET SALES BY CATEGORY: | |||||||||||
| For the Third Quarter Ended | |||||||||||
| May 29, | May 30, | ||||||||||
| (in thousands) | 2010 | 2009 | % Change | ||||||||
| Consumables | $ | 1,309,763 | $ | 1,201,033 | 9.1 | % | |||||
| Home products | 254,165 | 237,384 | 7.1 | % | |||||||
| Apparel and accessories | 226,690 | 219,193 | 3.4 | % | |||||||
| Seasonal and electronics | 206,371 | 185,479 | 11.3 | % | |||||||
| TOTAL | $ | 1,996,989 | $ | 1,843,089 | 8.4 | % | |||||
| For the Three Quarters Ended | |||||||||||
| May 29, | May 30, | ||||||||||
| (in thousands) | 2010 | 2009 | % Change | ||||||||
| Consumables | $ | 3,802,741 | $ | 3,565,542 | 6.7 | % | |||||
| Home products | 808,372 | 771,577 | 4.8 | % | |||||||
| Apparel and accessories | 623,347 | 620,175 | 0.5 | % | |||||||
| Seasonal and electronics | 675,665 | 631,888 | 6.9 | % | |||||||
| TOTAL | $ | 5,910,125 | $ | 5,589,182 | 5.7 | % | |||||
| STORES IN OPERATION: | |||||||||||
| For the Three Quarters Ended | |||||||||||
| May 29, | May 30, | ||||||||||
| 2010 | 2009 | ||||||||||
| Beginning Store Count | 6,655 | 6,571 | |||||||||
| New Store Openings | 125 | 148 | |||||||||
| Store Closings | (56 | ) | (65 | ) | |||||||
| Ending Store Count | 6,724 | 6,654 | |||||||||
| Total Square Footage (000s) | 57,267 | 56,527 | |||||||||
| Total Selling Square Footage (000s) | 47,724 | 47,060 | |||||||||
