MATTHEWS, N.C., Sept. 29 /PRNewswire-FirstCall/ -- Family Dollar Stores,
Inc. (NYSE: FDO), reported that net income per diluted share decreased 28.0%
to $0.18 from $0.25, and that net income was $29.2 million, or 30.0% below net
income of $41.7 million for the fourth quarter of the prior fiscal year. For
the full fiscal year, net income per diluted share decreased 13.3% to $1.30
from $1.50, and net income was $217.5 million or 15.7% below net income of
$257.9 million in fiscal 2004.
"Fiscal 2005 was a challenging year for our customer and for our Company,"
said Howard R. Levine, Chairman and Chief Executive Officer. "Despite the
macroeconomic challenges, we made significant progress on our key initiatives.
We installed coolers in approximately 1,000 stores, launched our new "Treasure
Hunt" initiative which delivered strong holiday sales growth, opened 500 new
stores and implemented our Urban Initiative in approximately 1,200 stores.
These strategic initiatives will provide the foundation for our future
profitable growth."
Fourth Quarter Results
As previously reported, sales for the fourth quarter ended August 27,
2005, were approximately $1.430 billion, or 8.0% above sales of approximately
$1.324 billion for the fourth quarter ended August 28, 2004. Sales in
comparable stores in the fourth quarter of 2005 increased approximately 0.6%
above the fourth quarter 2004. The customer count, as measured by the number
of register transactions in comparable stores, decreased approximately 2.3%,
and the average transaction increased approximately 2.9% to $8.98. During the
fourth quarter of 2005, the Company opened 222 new stores and closed 5 stores.
The gross profit margin, as a percentage of sales, was 31.9% in the fourth
quarter of 2005 compared to 31.9% in the fourth quarter of 2004. As a
percentage of sales, lower markdown expense partially offset higher freight
costs resulting from higher fuel costs. Inventory shrinkage and merchandise
mix did not appreciably impact the gross profit margin comparison.
Expenses, as a percentage of sales, increased to 28.6% in the fourth
quarter of 2005 from 27.0% in the fourth quarter of 2004. Lower than expected
sales and the planned expenses incurred in connection with the Urban
Initiative and the installation of refrigerated coolers for the sale of
perishable goods contributed to the increase in expenses, as a percentage of
sales. In addition, the Company recorded a one-time charge to establish
property tax accruals on leased properties.
Full Year Results
As previously reported, sales for the fiscal year ended August 27, 2005,
were approximately $5.825 billion, or 10.3% above sales of approximately
$5.282 billion for the fiscal year ended August 28, 2004. Sales in comparable
stores for the full year increased approximately 2.3% above fiscal 2004. The
customer count, as measured by the number of register transactions in
comparable stores, decreased approximately 0.7% and the average transaction
increased approximately 2.9% to $9.22.
The gross profit margin, as a percentage of sales, decreased to 32.9% in
fiscal 2005 from 33.8% in fiscal 2004. This decline was a result of stronger
sales of lower-margin basic consumables, higher inventory shrinkage and higher
freight expense, all as a percentage of sales.
Expenses, as a percentage of sales, increased to 27.0% in fiscal 2005 from
26.1% in fiscal 2004. Lower than expected sales and the planned expenses
incurred in connection with the Urban Initiative and the installation of
refrigerated coolers for the sale of perishable goods contributed to the
increase in expenses as a percentage of sales.
The Company's inventories at the end of fiscal 2005 were $1,090.8 million,
or 11.3% above inventories of $980.1 million last year. Inventory on a per
store basis at the end of fiscal 2005 was 1.8% higher than at the end of
fiscal 2004, excluding merchandise in transit to the distribution centers.
All of this increase was in hardline merchandise, which increased
approximately 4.3% per store, reflecting early receipt of holiday merchandise
and new inventory associated with the cooler program. Average softline
inventory per store declined approximately 5.2%.
In fiscal 2005, capital expenditures were $229.1 million compared with
$218.7 million in fiscal 2004. During fiscal 2005, the Company opened 500
stores and closed 68 stores. In addition, fiscal 2005 capital expenditures
included the installation of refrigerated coolers in approximately 1,000
stores and investments in the Company's distribution network, including the
completion of the Company's eighth distribution center in Marianna, Florida,
and an initial investment in the Company's ninth distribution center in Rome,
New York.
The Company also announced that in fiscal 2005, the Company purchased
3.3 million shares of the Company's Common Stock in the open market at a cost
of $92.0 million.
Outlook
Commenting on the Company's plans for fiscal 2006, Levine said, "This
year, we will move aggressively forward in those areas that are performing
well, and we will slow down and focus on improving those processes where we
have significant opportunity to do better. We plan to install coolers in
approximately 2,500 additional stores this year, and while we will not expand
the Urban Initiative beyond our target of 1,300 stores, we will continue to
support and refine the program to increase financial returns. To enable us to
build processes that will support a more balanced future expansion of our
store growth program, we will reduce our new store opening plan to 400 stores
in fiscal 2006. We believe that our business has significant growth potential
and our deliberate investment strategy will deliver stronger shareholder
returns as we position Family Dollar to better serve the needs of our growing
customer base."
For the fiscal year ending August 26, 2006, the Company expects comparable
store sales to increase 2% to 4%. The Company believes that higher
transportation expense resulting from higher fuel costs and the impact of a
continued mix shift toward lower-margin consumable merchandise will continue
to pressure gross profit margin in fiscal 2006. In addition, the Company
expects that operating expenses, as a percentage of sales, will be higher in
fiscal 2006, reflecting the expanded rollout of the cooler program and the
continued funding of the Urban Initiative program. Using these assumptions,
the Company expects earnings per share to be between $1.30 and $1.39,
including the impact of the expensing of stock options as required by
Statement of Financial Accounting Standards No. 123R, "Share-Based Payment,"
and other new compensation programs, and including the accretive benefit of
the Company's share repurchase program.
For the September reporting period, the Company's plan was for comparable
store sales to increase 0% to 2%, and month-to-date, the Company's sales are
at the high end of that range. For the first quarter ending November 26,
2006, the Company expects comparable store sales to increase 1% to 3% and
expects earnings per share to be between $0.30 and $0.32.
Family Dollar will host a conference call today, September 29, 2005, at
10:00 A.M. ET to discuss the financial results for the fourth quarter and
fiscal year ended August 27, 2005, and certain plans for the fiscal year
ending August 26, 2006. If you wish to listen, please call 1-888-323-9686 for
domestic USA calls and 210-234-0004 for international calls at least 10
minutes before the call is scheduled to begin. The passcode for the call is
"FAMILY DOLLAR." A replay of the call will be available from 12:00 Noon ET,
September 29, 2005, through October 6, 2005, by calling 1-800-934-9727 for
domestic USA calls and 402-220-0194 for international calls.
There also will be a live webcast of the conference call that can be
accessed at http://www.familydollar.com/investors.aspx?p=irhome. A replay of
the webcast will be available at the same address after 2:00 P.M. ET,
September 29, 2005.
Certain statements contained in this press release or in other press
releases, public filings, or other written or oral communications made by the
Company or our representatives, which are not historical facts are forward-
looking statements made pursuant to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
address the Company's plans, activities or events which the Company expects
will or may occur in the future. These forward-looking statements may be
identified by the use of the words "plan," "estimate," "expect," "anticipate,"
"probably," "should," "project," "intend," "continue," and similar terms and
expressions. Various risks, uncertainties and other factors could cause
actual results to differ materially from those expressed in any forward-
looking statements. Such risks, uncertainties and other factors include, but
are not limited to:
- competitive factors and pricing pressures, including energy prices,
- changes in economic conditions,
- the impact of acts of war or terrorism,
- changes in consumer demand and product mix,
- unusual weather or natural disasters that may impact sales and or
operations,
- the impact of inflation,
- merchandise supply and pricing constraints,
- success of merchandising and marketing programs,
- general transportation or distribution delays or interruptions,
- dependence on imports,
- changes in currency exchange rates, trade restrictions, tariffs,
quotas, and freight rates,
- availability of real estate,
- costs and delays associated with building, opening and operating new
distribution facilities and stores,
- costs, potential problems and achievement of results associated with
the implementation of new programs, systems and technology, including
supply chain systems, store technology, cooler installations and Urban
Initiative programs,
- changes in food and energy prices and their impact on consumer spending
and the Company's costs,
- adverse impacts associated with legal proceedings and claims,
- changes in shrinkage,
- changes in health care and other insurance costs,
- changes in the Company's ability to attract and retain employees,
- changes in state or federal legislation or regulations, including the
effects of legislation and regulations on wage levels and entitlement
programs.
Consequently, all of the forward-looking statements made by the Company in
this and other documents or statements are qualified by these and other
factors, risks and uncertainties. Readers are cautioned not to place undue
reliance on these forward-looking statements, which speak only as of the date
of this release. The Company does not undertake to publicly update or revise
its forward-looking statements even if experience or future changes make it
clear that projected results expressed or implied in such statements will not
be realized.
FAMILY DOLLAR STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(In thousands, except per share amounts)
For the Fourth Quarter Ended
Aug. 27, % of Net Aug. 28, % of Net
2005 Sales 2004 Sales
Net sales $1,429,843 100.0% $1,324,248 100.0%
Cost of sales 974,227 68.1% 901,153 68.1%
Gross margin 455,616 31.9% 423,095 31.9%
Selling, general and
administrative expenses 409,435 28.6% 356,970 27.0%
Income before income taxes 46,181 3.3% 66,125 4.9%
Income taxes 16,948 1.2% 24,473 1.8%
Net income $29,233 2.1% $41,652 3.1%
Net income per common share -
basic $0.18 $0.25
Average shares - basic 164,963 167,806
Net income per common share -
diluted $0.18 $0.25
Average shares - diluted 165,057 168,260
Dividends declared per common
share $0.095 $0.085
For the Fiscal Year Ended
Aug.27, % of Net Aug.28, % of Net
2005 Sales 2004 Sales
Net sales $5,824,808 100.0% $5,281,888 100.0%
Cost of sales 3,908,569 67.1% 3,496,278 66.2%
Gross margin 1,916,239 32.9% 1,785,610 33.8%
Selling, general and
administrative expenses 1,573,444 27.0% 1,378,948 26.1%
Income before income taxes 342,795 5.9% 406,662 7.7%
Income taxes 125,286 2.2% 148,758 2.8%
Net income $217,509 3.7% $257,904 4.9%
Net income per common share -
basic $1.30 $1.51
Average shares - basic 166,791 170,770
Net income per common share -
diluted $1.30 $1.50
Average shares - diluted 167,092 171,624
Dividends declared per common
share $0.370 $0.330
FAMILY DOLLAR STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share amounts)
August 27, 2005 August 28, 2004
Assets
Current assets:
Cash and cash equivalents $105,175 $87,023
Investment securities 33,530 120,840
Merchandise inventories 1,090,791 980,124
Deferred income taxes 100,493 84,084
Income tax refund receivable - 1,304
Prepayments and other current
assets 24,779 16,937
Total current assets 1,354,768 1,290,312
Property and equipment, net 1,027,475 918,449
Other assets 27,258 15,600
Total assets $2,409,501 $2,224,361
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable $574,831 $534,405
Accrued liabilities 315,508 266,180
Income taxes payable 4,272 -
Total current liabilities 894,611 800,585
Deferred income taxes 86,824 86,694
Commitments and contingencies
Shareholders' Equity:
Preferred stock, $1 par; authorized
and unissued 500,000 shares
Common stock, $.10 par; authorized
600,000,000 shares 18,887 18,767
Capital in excess of par 133,743 106,853
Retained earnings 1,654,861 1,498,890
1,807,491 1,624,510
Less: common stock held in
treasury, at cost 379,425 287,428
Total shareholders' equity 1,428,066 1,337,082
Total liabilities and shareholders'
equity $2,409,501 $2,224,361
FAMILY DOLLAR STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
August 27, August 28,
Years Ended (In thousands) 2005 2004
Cash flows from operating activities:
Net income $217,509 $257,904
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 114,733 102,010
Deferred income taxes (16,279) (4,268)
Tax benefit from stock option
exercises 3,700 4,476
Loss on disposition of property
and equipment 3,306 4,311
Changes in operating assets and
liabilities:
Merchandise inventories (110,667) (125,754)
Income tax refund receivable 1,304 (1,304)
Prepayments and other current
assets (7,842) 16,685
Other assets (11,658) 1,480
Accounts payable and accrued
liabilities 100,974 121,608
Income taxes payable 4,272 (671)
299,352 376,477
Cash flows from investing activities:
Purchases of investment securities (280,100) (282,265)
Sales of investment securities 367,410 365,924
Capital expenditures (229,065) (218,748)
Proceeds from dispositions of
property and equipment 2,000 1,550
(139,755) (133,539)
Cash flows from financing activities:
Net (purchases) / reissuance of
stock for treasury (91,997) (176,649)
Change in cash overdrafts (12,675) (20,501)
Proceeds from exercise of stock options 23,310 14,996
Payment of dividends (60,083) (54,755)
(141,445) (236,909)
Net increase in cash and cash
equivalents 18,152 6,029
Cash and cash equivalents at
beginning of year 87,023 80,994
Cash and cash equivalents
at end of year $105,175 $87,023
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Purchases of property and equipment
awaiting processing for payment,
included in accounts payable $12,239 $14,272
Interest 0 0
Income taxes 132,288 150,525
FAMILY DOLLAR STORES, INC. AND SUBSIDIARIES
Selected Additional Information
NET SALES BY DIVISION:
For the Fourth Quarter Ended
Comparable
Store
August 27, % of Net August 28, % of Net Sales
2005 Sales 2004 Sales Change
Hardlines $1,135.3 79.4% $1,038.2 78.4% 1.8%
Softlines $294.5 20.6% $286.0 21.6% -4.2%
For the Fiscal Year Ended
Comparable
Store
August 27, % of Net August 28, % of Net Sales
2005 Sales 2004 Sales Change
Hardlines $4,589.9 78.8% $4,104.0 77.7% 3.7%
Softlines $1,234.9 21.2% $1,177.9 22.3% -2.6%
STORES IN OPERATION:
August 27, August 28,
2005 2004
Beginning Store Count 5,466 5,027
New Store Openings 500 500
Store Closings 68 61
Ending Store Count 5,898 5,466
Total Square Footage (000s) 49,794 46,136
Total Selling Square Footage (000s) 41,285 38,187
SOURCE Family Dollar Stores, Inc.
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Related links:
http://www.familydollar.com
http://www.familydollar.com/investors.aspx?p=irhome
Company News On-Call:
http://www.prnewswire.com/comp/300875.html
CONTACT:
Kiley F. Rawlins, CFA, Divisional Vice
President of Family Dollar Stores, Inc., +1-704-849-7496
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