Tags: Family Dollar | FDO | Wal-Mart | WMT | Dollar General | DG | retail

Family Dollar Surges on Bargain Hunters

By    |   Thursday, 07 Jul 2011 03:58 PM

Every cloud has a silver lining, and so do weak economies. Just ask Family Dollar (FDO), a discount retailer reporting surging profits as shoppers flock to buy cheaper items. Net income for Family Dollar for the third quarter of fiscal 2011 rose by 6.5 percent to $111.1 million compared with $104.4 million for the same period a year ago.

Net sales for the quarter hit $2.15 billion, 7.8 percent above the $1.99 billion reported a year ago. Comparable-store sales were up 4.7 percent on higher traffic and on a higher average value of customer transactions.

"We accomplished much this quarter to position us to capture greater market share and execute our longer-term vision for Family Dollar," said Family Dollar Chairman and CEO Howard Levine.

"I remain confident that our strategy of providing customers with value and convenience, combined with the impactful investments we are making to improve the shopping experience in our stores and our profitability, will continue to deliver strong shareholder returns."

Investors are taking notice. Pershing Square Capital, the hedge fund operated by investor Bill Ackman, bought an 8.9 percent stake in the retailer in early June, according to an SEC filing.

Party over

Some analysts, however, believe sales and profits can only climb so high. Family Dollar deserves credit for good marketing, sound inventory management, cost control and pricing during these tough economic times.

But, says Zacks Investment Research, heavyweight competitors like Wal-Mart (WMT) and Dollar General (DG) won't sit idly by and applaud Family Dollar's success.

Plus customers at discount retailers tend to be more sensitive to inflation, high fuel prices, and interest rate hikes. Concerns that unemployment rates will not fall soon could also tighten purse-strings as well.

Credit Suisse recently lowered the stock's rating to neutral from outperform. Barclays downgraded the company's stock to equal weight from overweight.

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Every cloud has a silver lining, and so do weak economies. Just ask Family Dollar (FDO), a discount retailer reporting surging profits as shoppers flock to buy cheaper items. Net income for Family Dollar for the third quarter of fiscal 2011 rose by 6.5 percent to $111.1...
Family Dollar,FDO,Wal-Mart,WMT,Dollar General,DG,retail,stocks
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2011-58-07
Thursday, 07 Jul 2011 03:58 PM
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