Family Dollar Profit Falls by a Third


Discount retailer Family Dollar Stores Inc (NYSE:FDO), under pressure from activist investor Carl Icahn to sell itself, said its profit fell by a third as the company cleared inventory ahead of store closures and competition intensified.

Shares of Family Dollar, which reported its third straight quarterly decline in same-store sales, fell nearly 1 percent in premarket trading.

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The struggling retailer also tweaked its full-year earnings forecast for the third time. The company said it now expects earnings of $3.07-$3.17 per share, compared to its previous forecast of $3.05-$3.25. The latest forecast excludes about 51 cents per share in restructuring charges.

Icahn, who became Family Dollar's largest shareholder last month, had said he would push the company to sell itself to rival Dollar General Corp to help them cope with intensifying competition.

Icahn's proposal, however, was thrown into doubt after Dollar General said its CEO Rick Dreiling had decided to retire next year.

Dollar stores such as Family Dollar, Dollar General and Dollar Tree Inc are facing increasing competition from big-box retailers such as Wal-Mart Stores Inc for business from their traditional low-income shoppers.

Family Dollar's gross profit fell to 34.3 percent of net sales in the third quarter ended May 31, from 34.7 percent a year earlier. The company said it took a $1.5 million inventory write-down in an effort to clear merchandise at its 370 stores that are scheduled to close this year.

The company's net income fell to $81.1 million, or 71 cents per share, from $120.9 million, or $1.05 per share, a year earlier.

Excluding items, the retailer earned 85 cents per share, below the average analyst estimate of 89 cents, according to Thomson Reuters I/B/E/S.

Net sales rose 3.3 percent to $2.66 billion, helped by strong demand in frozen food and tobacco.

Analysts had expected net sales of $2.61 billion.

Same-store sales fell 1.8 percent on fewer customer transactions, the company said.

The North Carolina, Matthews-based retailer's shares were trading at $63.65 before the bell. They closed at $64.24 on the New York Stock Exchange on Wednesday.