Tags: Family | Dollar | soaring | FDO

Family Dollar Soaring in Flat Market

By Tim Plaehn   |   Friday, 04 Nov 2011 12:08 PM

Discount store chain Family Dollar Stores (FDO) has taken advantage of the slow economy to grow the number of stores and profits at an impressive rate. The share price of FDO has been soaring, up 30 percent over the last year while the market has been flat. After the recent share price results, the Wall Street analysts should update their target prices.

Family Dollar has stores in 44 states with an emphasis on low price, daily-use items. Products rarely cost more than $10. Stores are often less than 10,000 square feet in size and have been opened in smaller towns and rural areas. For the 2011 fiscal year which ended on Aug. 28, Family Dollar net added 238 new stores for an end of year total of just over 7,000.

For the full fiscal year, sales increased by 8.7 percent to $8.55 billion, up from $7.87 billion. Same-store sales growth for the year was 5.5 percent. Operating profit was 7.46 percent of sales, an increase of 0.14 percent. Net income of $3.12 per share was up 19 percent from the $2.62 earned in 2010. The Wall Street consensus estimate for 2012 earnings is $3.63 per share.

Returning cash

For 2011, the Family Dollar Stores board increased the dividend by 12.5 percent to 18 cents quarterly. During the year, the company also spent $670 million to buy back stock. The result of the buyback can be seen in the earnings numbers. Net profit increased by 8.5 percent to $388 million yet net income per share increased by 19 percent.

Family Dollar's biggest competitor is Dollar General (DG). Dollar General has more than 9,000 stores and a market cap twice the size of Family Dollar. Over the last year, the DG share price outpaced FDO by about 10 percent.

Barclays Capital analysts recently upgraded FDO to overweight from equal weight. Analyst Dan Wewer of Raymond James & Associates upgraded the stock to strong buy from outperform.

The company next reports on Jan. 5.

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Discount store chain Family Dollar Stores (FDO) has taken advantage of the slow economy to grow the number of stores and profits at an impressive rate. The share price of FDO has been soaring, up 30 percent over the last year while the market has been flat. After the recent...
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