Family Dollar fourth quarter profit drops, same store sales improve marginally

Thu Oct 9, 2014 6:54pm EDT
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By Nandita Bose

CHICAGO (Reuters) - Discount retailer Family Dollar Stores Inc FDO.N, which is trying to ward off a hostile bid from rival Dollar General Corp DG.N, said its fourth-quarter profit slid 66 percent hurt by inventory markdowns, restructuring charges and merger fees.

Family Dollar, which has agreed to sell itself to smaller rival Dollar Tree (DLTR.O: Quote) for a lower cash-and-stock deal of $8.5 billion, rejected Dollar General's $9.1 billion all-cash bid saying the offer did not address anti-trust concerns.

After being spurned twice, Dollar General, which offered to sell up to 1,500 stores and pay $500 million as a break-up fee if the deal failed to clear antitrust reviews, took its bid hostile and approached Family Dollar shareholders directly.

The company did not comment on its merger plans in its earnings conference call on Thursday. On Oct. 1, Dollar General extended its tender offer to acquire Family Dollar shares for $80 a piece from Oct. 8 to end of this month.

The battle in the discount retail industry comes at a time when Dollar stores are desperate to scale up as they try to keep lower-income shoppers from being lured by Wal-Mart Stores Inc (WMT.N: Quote) and Target Corp (TGT.N: Quote).

Family Dollar, which did not provide guidance for fiscal 2015 pending its merger with Dollar Tree, said the company's first quarter in fiscal 2015 will be challenging due to competitive intensity and as low-income customers continue to be wary of spending.

Net income for the fourth quarter ended Aug. 30 fell 66 percent to $34.5 million, or 30 cents per share from $102.2 million, or 88 cents per share, a year earlier. Excluding items, earnings were 73 cents per share from 86 cents per share.

Family Dollar had $10.4 million in inventory write-downs, as it shut 375 stores during the quarter. It also had $55.2 million in restructuring charges as part of its planned store closures and $9.4 million in expenses related to its pending merger.   Continued...

The entrance to the Family Dollar store is seen in Westminster, Colorado is seen March 30, 2011.  REUTERS/Rick Wilking