MATTHEWS, N.C., Dec. 21 /PRNewswire-FirstCall/ -- Family Dollar Stores,
Inc. (NYSE: FDO), reported that net income per diluted share for the first
quarter of fiscal 2006 ended November 26, 2005, was $0.32 compared with $0.32
for the first quarter of fiscal 2005 ended November 27, 2004. Net income for
the first quarter was $51.4 million, or 5.5% below net income of $54.4 million
for the first quarter of fiscal 2005.
"Last year, our Company made significant investments in four key
initiatives: the installation of refrigerated coolers, the Urban Initiative,
the Treasure Hunt merchandise program, and new stores. This year, we are
accelerating investment in initiatives that performed well and are focusing
efforts to improve initiatives that did not fully meet our expectations," said
Howard R. Levine, Chairman and Chief Executive Officer. "While the macro-
economic environment continues to be challenging for our customers, we are
executing against our plan and experiencing positive results. In the first
quarter, we increased profitability in our Urban Initiative markets and opened
73 new stores as planned. We installed refrigerated coolers in approximately
400 stores and improved the coordination of merchandising, marketing and store
operations in support of our Treasure Hunt initiative. I am pleased with the
improvements we have made this quarter, and I believe that with the support
and commitment of all our hardworking Associates, these initiatives will
position us well for future profitable growth."
As previously reported, sales for the first quarter of fiscal 2006 were
approximately $1.511 billion, or 9.5% above sales of approximately $1.380
billion for the first quarter of fiscal 2005. Sales in comparable stores
increased approximately 3.0%. The customer count, as measured by the number
of register transactions in comparable stores, decreased approximately 2.1%,
and the average transaction increased approximately 5.1% to $9.36.
During the first quarter of fiscal 2006, Hurricanes Katrina, Rita and
Wilma struck the U.S. Gulf Coast and Florida, impacting numerous stores in the
afflicted areas. Since the Company's stores are widely dispersed, lost sales
due to closed stores resulting from damage or power outages were generally
limited and were offset by increased sales in other stores. The most
significant storm-related losses were related to the loss of merchandise
inventories, furniture and fixtures and leasehold improvements at individual
stores in the paths of the storms. The Company expects the majority of the
losses incurred will be covered by insurance.
The gross profit margin, as a percentage of sales, was 33.6% in the first
quarter of fiscal 2006 compared to 33.4% in the first quarter of fiscal 2005.
As a percentage of sales, lower inventory shrinkage and improved initial
merchandise mark-up offset higher freight costs resulting from higher fuel
costs and slightly higher markdown expense.
Selling, general and administrative expenses, as a percentage of sales,
increased to 28.1% in the first quarter of fiscal 2006 from 27.2% in the first
quarter of fiscal 2005. The increase, as a percentage of sales, was a result
of higher occupancy costs, insurance costs and compensation expense related to
stock-based compensation. In the first quarter of fiscal 2006, the Company
adopted Statement of Financial Accounting Standards No. 123R ("SFAS 123R") for
its share-based compensation plans. Under SFAS 123R, all share-based
compensation cost is recognized as an expense in the income statement.
Results for the first quarter of fiscal 2005 did not include any stock-based
compensation.
On September 27, 2005, the Company obtained $250 million through a private
placement under Section 4(2) of the Securities Act of 1933, as amended, of
unsecured Senior Notes (the "Notes") to a group of institutional accredited
investors. In the first quarter of fiscal 2006, the Company recorded interest
expense of approximately $2.2 million related to the Notes. Net interest
expense for the quarter was $1.3 million. The Company had no outstanding debt
in the first quarter of fiscal 2005.
On October 4, 2005, the Company executed an overnight share repurchase
transaction with a bank for the acquisition of ten million shares, or
approximately 6%, of the Company's outstanding Common Stock. The transaction
was financed with the proceeds of the Notes. There were no other purchases of
Common Stock during the first quarter of fiscal 2006. As of November 26,
2005, the Company had approximately 6.9 million shares authorized to be
purchased.
The Company's inventories at November 26, 2005, were $1,110.8 million, or
7.6% above inventories of $1,032.8 million at November 27, 2004. Inventory on
a per store basis at November 26, 2005, was relatively flat compared with
inventory on a per store basis at November 27, 2004.
In the first quarter of fiscal 2006, capital expenditures were
$48.8 million compared with $43.0 million in the first quarter of fiscal 2005.
During the first quarter of fiscal 2006, the Company opened 73 new stores and
closed 19 stores.
Outlook
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 higher occupancy costs, increased compensation expense
associated with stock-based compensation, 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 SFAS 123R and other new compensation
programs, and including the accretive benefit of the Company's share
repurchase program.
As previously announced, the Company's comparable store sales plan for the
month of December is an increase of 2% to 4%. The biggest shopping days of
the season have not yet occurred, and results for the full month will be
significantly impacted by the next several days. If current sales trends
continue, the Company expects comparable store sales for the month of December
to increase 2% to 3%. For the second quarter, the Company expects comparable
store sales to increase 2% to 3% and expects earnings per share to be between
$0.45 and $0.50.
Cautionary Statements
Certain statements contained in this press release, including statements
regarding anticipated insurance recoveries and those set forth under the
caption "Outlook," 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. 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,
- the Company's ability to successfully execute its ongoing operational
functions,
- general transportation or distribution delays or interruptions,
- dependence on imports,
- changes in currency exchange rates, trade restrictions, tariffs,
quotas, and freight rates,
- success of new store opening programs,
- 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 programs, systems and technology, including
supply chain systems, store technology, cooler installations, Urban
Initiative programs, and real estate expansion goals,
- 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,
- 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, including those set forth under "Cautionary
Statement Regarding Forward-Looking Statements" in "Management's Discussion
and Analysis of Financial Condition" in the Company's Annual Report on Form
10-K. 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.
First Quarter Earnings Conference Call Information
The Company will host a conference call today, December 21, 2005, at
10:00 A.M. ET to discuss the results. If you wish to participate, please call
1-888-935-0258 for domestic USA calls and 773-756-0828 for international calls
at least 10 minutes before the call is scheduled to begin. The passcode for
the conference call is "FAMILY DOLLAR." A replay of the call will be
available from 12:00 Noon ET, December 21, 2005, through December 27, 2005, by
calling 1-866-502-6119 for domestic USA calls and 203-369-1860 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, December
21, 2005.
About Family Dollar Stores, Inc.
With more than 5,900 stores in a 44-state area ranging as far northwest as
Idaho, northeast to Maine, southeast to Florida, and southwest to Arizona,
Family Dollar is one of the fastest growing discount store chains in the
United States. Family Dollar has provided value-conscious consumers with
competitive prices at neighborhood stores for more than forty-six years.
Offering a consistent selection of name-brand and good quality merchandise in
an attractive and convenient shopping environment, the Company is focused on
continuing to meet the needs of shoppers looking for excellent value.
FAMILY DOLLAR STORES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
For the First Quarter Ended
(in thousands, except per share Nov. 26, % of Net Nov. 27, % of Net
amounts) 2005 Sales 2004 Sales
Net sales $1,511,457 100.0% $1,380,245 100.0%
Cost of sales 1,003,254 66.4% 919,893 66.6%
Gross margin 508,203 33.6% 460,352 33.4%
Selling, general and
administrative expenses 425,291 28.1% 375,711 27.2%
Operating profit 82,912 5.5% 84,641 6.2%
Interest expense (income), net 1,342 0.1% (524) 0.0%
Income before income taxes 81,570 5.4% 85,165 6.2%
Income taxes 30,181 2.0% 30,736 2.2%
Net income $51,389 3.4% $54,429 4.0%
Net income per common share - basic $0.32 $0.32
Average shares - basic 159,330 167,619
Net income per common share -
diluted $0.32 $0.32
Average shares - diluted 160,472 168,008
Dividends declared per common share $0.095 $0.085
FAMILY DOLLAR STORES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(unaudited)
(in thousands, except per share Nov. 26, Nov. 27, Aug. 27,
amounts) 2005 2004 2005
Assets
Current assets:
Cash and cash equivalents $112,468 $102,683 $105,175
Investment securities 33,875 83,075 33,530
Merchandise inventories 1,110,785 1,032,754 1,090,791
Deferred income taxes 106,942 87,543 100,493
Prepayments and other current assets 36,243 25,164 24,779
Total current assets 1,400,313 1,331,219 1,354,768
Property and equipment, net 1,041,742 934,426 1,027,475
Other assets 26,623 14,543 27,258
Total assets $2,468,678 $2,280,188 $2,409,501
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued
liabilities $831,640 $779,525 $890,339
Income taxes payable 38,175 29,139 4,272
Total current liabilities 869,815 808,664 894,611
Long-term debt 250,000 - -
Deferred income taxes 84,278 87,861 86,824
Commitments and contingencies
Shareholders' Equity:
Preferred stock, $1 par; authorized
and unissued 500,000 shares
Common stock, $.10 par; authorized
600,000,000 shares 17,887 18,796 18,887
Capital in excess of par 127,180 113,232 133,743
Retained earnings 1,498,943 1,539,063 1,654,861
1,644,010 1,671,091 1,807,491
Less: common stock held in treasury,
at cost 379,425 287,428 379,425
Total shareholders' equity 1,264,585 1,383,663 1,428,066
Total liabilities and shareholders'
equity $2,468,678 $2,280,188 $2,409,501
FAMILY DOLLAR STORES, INC. AND SUBSIDIARIES
Selected Additional Information
NET SALES BY DIVISION:
For the First Quarter Ended
Comparable
Nov. 26, % of Net Nov. 27, % of Net Store Sales
2005 Sales 2004 Sales Change
Hardlines $1,208.0 79.9% $1,090.2 79.0% 4.2%
Softlines $303.5 20.1% $290.0 21.0% -1.6%
STORES IN OPERATION:
November 26, 2005
Beginning Store Count 5,898
New Store Openings 73
Store Closings (19)
Ending Store Count 5,952
Total Square Footage (000s) 50,319
Total Selling Square Footage (000s) 41,723
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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