Profits Fall at Family Dollar

Matthews, N.C.— Hobbled by falling margins, rising costs and bloated stockpiles, fourth fiscal quarter profits at neighborhood retailer Family Dollar Inc. fell 9.8 percent, to $43 million from $47.7 million last year.

Sales at the retailer increased 9.6 percent, to $1.3 billion from $1.2 billion, helped by continued rapid expansion. But the acid-test measure of same-store sales edged up just 0.7 percent.

Sales of basic consumable merchandise continued to hold steady, the company said, “but sales of more discretionary merchandise, such as hanging apparel and domestics, were significantly below the company's plan.” The adverse mix of product, coupled with higher shrinkage levels, put downward pressure on margins, which contracted 100 basis points, or 1 percentage point, to 31.9 percent from 32.9 percent the prior year.

Putting more pressure on the bottom line, operating costs climbed slightly when measured as a percentage of sales, edging up 10 basis points, or one-tenth of a percentage point, to 26.8 percent from 26.7 percent.

Taking another bite out of the bottom line, inventory levels rose faster than the pace of sales, rising 14.7 percent, to $980.1 million from $854.4 million, outracing the 9.6 percent increase in overall sales.

The retailer said sales of hardlines rose 2.9 percent during the closing quarter, while softlines sales dropped 7.2 percent. The number of register transactions was roughly flat with year-before levels, while the average transaction increased about 0.5 percent, to $8.70.