MATTHEWS, N.C., Sept. 30 /PRNewswire-FirstCall/ -- Family Dollar Stores,
Inc. (NYSE: FDO), a discount store chain operating 5,481 stores in 44 states,
reported that sales for the fourth quarter ended August 28, 2004, were
$1,324.2 million, or 9.6% above sales of $1,208.5 million for the fourth
quarter ended August 30, 2003. Net income was $43.0 million, or 9.9% below net
income of $47.7 million for the fourth quarter of the prior fiscal year, and
net income per diluted share decreased to $.26 from $.28.
Sales for the fifty-two weeks in the fiscal year ended August 28, 2004,
were $5,281.9 million, or 11.2% above sales of $4,750.2 million for the fifty-
two weeks in the fiscal year ended August 30, 2003. Net income was
$262.7 million for fiscal 2004, or 6.1% above net income of $247.5 million for
fiscal 2003, and net income per diluted share increased to $1.53 from $1.43.
The sales gains in the fourth quarter are attributable to increased
sales in existing stores and to sales from new stores opened as part of the
Company's store expansion program. Sales in existing stores increased
approximately 0.7% in the fourth quarter ended August 28, 2004, above the
comparable period last year, including an increase of approximately 2.9% in
sales of hardlines and a decrease of approximately 7.2% in sales of softlines.
The customer count, as measured by the number of register transactions in
existing stores, was at approximately the same level as in the fourth quarter
of the prior year, and the average transaction increased approximately 0.5%
to $8.70.
Sales in existing stores for comparable fifty-two week periods increased
approximately 1.9%. This included an increase of approximately 3.2% in sales
of hardlines and a decrease of approximately 2.5% in sales of softlines. In
fiscal 2004, the customer count increased approximately 0.7% and the average
transaction increased approximately 0.9% to $8.95.
The increase in total sales also is attributable to sales from new stores.
During the fourth quarter ended August 28, 2004, 203 new stores
opened and 6 stores closed. During the fiscal year, the Company opened 500
stores and closed 61 stores. At the end of the fiscal year on August 28,
2004, 5,466 stores were operating in 44 states.
During the fourth quarter ended August 28, 2004, sales of basic consumable
merchandise continued to be satisfactory. However, sales of more
discretionary merchandise, such as hanging apparel and domestics, were
significantly below the Company's plan. This adverse mix shift and higher
shrinkage levels resulted in a decrease in the gross profit margin as a
percent to sales from 32.9% in the fourth quarter last year to 32.0% in the
fourth quarter this year. With sales below plan for the quarter, expenses as
a percent to sales were deleveraged, increasing from 26.7% in the fourth
quarter last year to 26.8% in the fourth quarter this year. The deleverage of
expenses was mitigated by the reduction of amounts previously accrued for
bonus payments.
The gross profit margin as a percent to sales was 33.8% for both the
fiscal year ended August 28, 2004, and the prior fiscal year, as lower
merchandise markdowns were offset by a shift in the merchandise mix to more
lower margin basic consumables and by increased shrinkage and freight costs.
Expenses as a percent to sales increased to 26.0% in the fiscal year ended
August 28, 2004, from 25.6% in the prior fiscal year. The approximate 1.9%
increase in sales in existing stores in fiscal 2004 was below the Company's
plan, and with continued increases in insurance costs, including workers'
compensation, contributed to the deleveraging of expenses.
The Company's inventories at the end of fiscal 2004 were approximately
5.5% higher on a per store basis than at the end of fiscal 2003. The Company
accelerated the flow of seasonal merchandise as part of the program to improve
store level presentations and sales during the holiday period, and this
accounted for approximately two-thirds of the increase. As a result of
conservative planning and the curtailment of some planned purchases, out-of-
season apparel inventories at the end of fiscal 2004 were approximately 8%
lower on a per store basis than at the end of fiscal 2003.
In commenting on fiscal 2004 and the Company's plans for fiscal 2005,
Howard R. Levine, Chairman and Chief Executive Officer, stated that: "The
6.1% increase in net income in fiscal 2004 was achieved in a difficult
economic environment for the Company's low to low-middle income customer base.
While we did not achieve our targeted net income growth, we did continue to
reinvest in the business. In fiscal 2004, 500 new stores were opened. Good
progress was made in the implementation of the multi-year "Store of the
Future" project, including infrastructure investments so that our customers
are able to use PIN-based debit cards in our stores. We also completed the
strategic assessment, concept testing and development of implementation plans
for urban and cooler programs that will be key initiatives in fiscal 2005.
The Company maintained its strong financial position with no debt on the
balance sheet. Cash dividends declared per share of Common Stock increased by
13.8% - the 28th consecutive year of cash dividend increases. We also
repurchased about 5.6 million shares of Common Stock at a cost of about
$176.7 million."
Mr. Levine noted that: "Family Dollar's financial strength permits us to
continue to invest in the Company's future. In fiscal 2005, our focus will be
on initiatives that we believe will be the growth engines that will drive
increases in sales and earnings."
The four key initiatives in fiscal 2005 are:
* Urban Initiative -- Investments being made in process changes,
technology and people will improve the operating performance of more than
1,000 high-volume stores in thirty large metropolitan markets. This
initiative is being rolled out in waves, with approximately 250 stores to be
impacted in the first quarter. It incorporates a number of "Store of the
Future" components, including an automated hiring process and organizational
changes to support a more mobile and flexible workforce.
* "Treasure Hunt" Merchandise -- Family Dollar's basic assortment of
merchandise is being supplemented by additional opportunistically purchased
goods. These goods are designed to create more excitement in the stores
throughout the year, with particular emphasis on the holiday season. An
advertising circular will be distributed in early November 2004 to generate
additional sales.
* Coolers -- Beginning in January 2005 coolers for perishable food will be
installed in selected stores. By the end of the fiscal year in August 2005,
the current plan is to have coolers in approximately 500 stores. The Company
also plans to begin implementation by fiscal year-end of new point of sale
software to facilitate the acceptance of food stamps in stores with coolers,
simplify cashier training and speed up checkout processes.
* New Stores -- The Company will continue its aggressive store opening
program. Current plans are to open about 500 to 560 stores and close 60 to 70
stores, resulting in about 8% to 9% net new store growth and 9% to 10% net
square footage growth. Urban markets will continue to be the focus, with
approximately 60% to 65% of the new stores expected to open in urban areas.
As these initiatives are implemented, the Company expects that increases
in sales in existing stores will accelerate from the 0.7% increase in the
fourth quarter of fiscal 2004 to increases in the 3% to 5% range later in the
fiscal year. As previously reported, the Company's plan is for sales in
existing stores in the five week period ending October 2, 2004, to be in a
range from approximately the same level to up 2% from the similar period in
the prior fiscal year. Based on sales through September 29, the Company
currently expects sales in existing stores to be within this range.
Funding of the initiatives will result in additional expenses and,
accordingly, the Company's plan is for net income per diluted share of Common
Stock to be between $1.59 and $1.63 in fiscal 2005. With sales increases in
existing stores expected to be in the 3% to 5% range in the fourth quarter,
the highest increase in net income should be in that quarter. The most
substantial investments are planned to occur in the third quarter and the
additional expenses will adversely impact net income in that quarter.
Mr. Levine concluded that: "Fiscal 2004 was a difficult year as the
economy was not favorable for Family Dollar's low and low-middle income
customer base. We are hopeful that energy prices will decrease, job creation
numbers will increase and the economic health of our customer base will
improve. Those are issues we do not control. We are addressing issues we
do control. Regardless of the economy, we are convinced that by focusing on
the four key initiatives referred to above we will improve our Company's
operating performance and position Family Dollar for continued long-term
profitable growth."
Family Dollar will host a conference call on Thursday, September 30, 2004,
at 10:00 A.M. ET to discuss the financial results for the fourth quarter and
fiscal year ended August 28, 2004, and certain plans for the fiscal year
ending August 27, 2005. If you wish to listen, please call 888-791-5525 for
domestic USA calls and 773-756-4619 for international calls at least 10
minutes before the call is scheduled to begin. A replay of the call will be
available from about 1:00 P.M. ET, September 30, 2004, through October 7,
2004, by calling 800-234-2685 for domestic USA calls and 402-220-9688 for
international calls. There also will be a live webcast of the conference call
that can be accessed at http://www.familydollar.com/investors.asp or by clicking on
the webcast icon on the "Investors" page at http://www.familydollar.com A replay of
the webcast will be available at the same address after 2:00 P.M. ET,
September 30, 2004.
Certain statements contained in this press release 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 and activities or
events which the Company expects will or may occur in the future. A number of
important factors could cause actual results to differ materially from those
expressed in any forward-looking statements. Such factors include, but are
not limited to, competitive factors and pricing pressures, general economic
conditions, the impact of acts of war or terrorism, changes in consumer demand
and product mix, unusual weather that may temporarily impact sales, inflation,
merchandise supply constraints, 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, legal
proceedings and claims, changes in shrinkage, changes in health care and other
insurance costs, and the effects of legislation and regulations on wage levels
and entitlement programs. Consequently, all of the forward-looking statements
made 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.
The figures are as follows:
(In thousands, except per share amounts)
Fourth Quarter Ended
August 28, 2004 August 30, 2003
Net Sales $1,324,248 $1,208,474
Cost of Sales 901,153 810,826
Gross Margin 423,095 397,648
Selling, General and
Administrative Expenses 354,869 322,566
Income Before Income Taxes 68,226 75,082
Income Taxes 25,244 27,405
Net Income 42,982 47,677
Net Income Per Common Share-Basic $.26 $.28
Average Shares-Basic 167,806 172,082
Net Income Per Common Share-Diluted $.26 $.28
Average Shares-Diluted 168,260 173,314
Dividends Declared Per Common Share $.08-1/2 $.07-1/2
Fiscal Year Ended
August 28, 2004 August 30, 2003
Net Sales $5,281,888 $4,750,171
Cost of Sales 3,496,278 3,145,788
Gross Margin 1,785,610 1,604,383
Selling, General and
Administrative Expenses 1,371,395 1,214,658
Income Before Income Taxes 414,215 389,725
Income Taxes 151,530 142,250
Net Income 262,685 247,475
Net Income Per Common Share-Basic $1.54 $1.44
Average Shares-Basic 170,770 172,346
Net Income Per Common Share-Diluted $1.53 $1.43
Average Shares-Diluted 171,624 173,354
Dividends Declared Per Common Share $.33 $.29
Consolidated Balance Sheets
(In thousands, except share amounts)
Fiscal Year Ended
August 28, 2004 August 30, 2003
ASSETS
Current assets:
Cash and cash equivalents $ 149,602 $ 206,731
Merchandise inventories 980,124 854,370
Deferred income taxes 77,341 61,769
Income tax refund receivable 1,304 -
Prepayments and other
current assets 16,937 33,622
Total current assets $1,225,308 $1,156,492
Property and equipment, net 926,514 812,123
Other assets 15,600 17,080
$2,167,422 $1,985,695
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 476,144 $ 401,799
Accrued liabilities 237,407 192,861
Income taxes payable - 671
Total current liabilities 713,551 595,331
Deferred income taxes $ 93,471 $ 79,395`
Commitments and contingencies
Shareholders' equity:
Preferred stock, $1 par;
authorized and unissued
500,000 shares
Common stock, $.10 par;
authorized 600,000,000
shares $ 18,767 $ 18,691
Capital in excess of par 106,853 87,457
Retained earnings 1,522,208 1,315,600
1,647,828 1,421,748
Less common stock held in
treasury, at cost 287,428 110,779
1,360,400 1,310,969
$2,167,422 $1,985,695
SOURCE Family Dollar Stores, Inc.
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Related links:
http://www.familydollar.com
http://www.familydollar.com/investors.asp
Company News On-Call:
http://www.prnewswire.com/comp/300875.html
CONTACT:
George R. Mahoney, Jr., Executive Vice
President of Family Dollar Stores, Inc., +1-704-814-3252
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