Family Dollar drives profit in Q4

MATTHEWS, NC — Driven by continued rapid expansion and a double-digit gain in sales, fourth-quarter profits at Family Dollar Stores Inc., a neighborhood small-store chain, jumped up by 13.8 percent, to $47.7 million from $41.9 million last year.

Sales increased by 14.2 percent, to $1.2 billion from $1.1 billion last year, lifted by stronger same-store sales and the rollout of new units. Same-store sales advanced by 4.6 percent, with hard lines improving by 5.1 percent, outpacing a 2.8 percent gain in softlines sales.

The retailer said the customer count, measured by the number of register transactions in existing stores, increased by about 3.9 percent, while the average transaction increased by 0.5 percent, to $8.66.

Fueling continued double-digit growth during the fourth fiscal quarter, which ended Aug. 30, Family Dollar opened 190 new stores while closing two. For the entire fiscal year, the chain opened 475 stores and closed 64. By the end of the year, the company operated 5,027 stores in 43 states.

Average gross margin expanded by 60 basis points, or six-tenths of a percentage point, during the fourth quarter, to 32.9 percent from 32.3 percent a year ago, helped by wider margins on apparel and other seasonal goods. But offsetting stronger margins were higher costs, which moved up by 70 basis points, or seven-tenths of a percentage point, to 26.7 percent from 26.0 percent last year. Driving expenses higher, the retailer said, was above-plan workers' compensation costs.

Polishing up its crystal ball, Family Dollar forecast that same-store sales in the first fiscal quarter, October through December, will rise by 4 percent to 6 percent. That, in combination with sales generated by new stores, should help propel earnings per share up by 14 percent to 16 percent during the final calendar quarter of the year.