Family Dollar Reports First Quarter Results

  Family Dollar Reports First Quarter Results

  *First Quarter Net Sales Increased 12.7%
  *Comparable Store Sales Increased 6.6%
  *Earnings Per Diluted Share Increased to $0.69
  *December Comparable Store Sales Increased Approximately 2.5%
  *Management Provides Updated Guidance for FY13

Business Wire

MATTHEWS, N.C. -- January 3, 2013

Family Dollar Stores, Inc. (NYSE: FDO) today reported that for the first
quarter of fiscal 2013 ended November 24, 2012, net sales increased to $2.42 
billion and net income per diluted share for the quarter increased to $0.69.

“The investments we have made to increase our relevance to the customer are
delivering results. We are driving more traffic, and we are increasing our
market share,” said Howard R. Levine, Chairman and CEO. “While the near-term
economic environment remains difficult to predict, I continue to be excited
about the long-term opportunity for our business. We are seeing tangible
benefits from our margin-enhancing investments in global sourcing and private
brands, and as we work to drive further benefit from the investments we are
making to expand profitability, I remain confident that our efforts will
deliver stronger results as we progress through fiscal 2013 and beyond.”

Fiscal 2013 First Quarter Results

Commenting on the first quarter results, Levine said, “Early results from our
sales-driving initiatives exceeded our expectations in the first quarter,
resulting in more gross margin pressure than anticipated. This mix pressure,
combined with expected headwinds from insurance expense, resulted in earnings
that were at the low end of our guidance.”

Net sales for the quarter increased 12.7% to $2.42 billion compared to $2.15
billion in the first quarter of fiscal 2012. Sales were strongest in the
Consumables category, which increased 18.5% during the quarter, driven
primarily by strong growth in tobacco, food and health and beauty aids. During
the quarter, the Company opened 125 new stores, closed one store, and
renovated, relocated or expanded 169 stores.

Comparable store sales for the quarter increased 6.6% as a result of increased
customer traffic and an increase in the average customer transaction value.

Gross profit for the quarter increased 9.1% to $826.8 million, or 34.1% of net
sales, compared to $757.6 million, or 35.3% of net sales, in the first quarter
of fiscal 2012. As a percentage of sales, the impact of stronger sales of
lower-margin consumables, higher markdowns and increased inventory shrinkage
was partially offset by higher markups and lower freight expense.

Selling, general and administrative (SG&A) expenses, as a percentage of net
sales, were 28.9% in the quarter compared to 29.2% in the first quarter of
fiscal 2012. Most expenses were leveraged during the quarter. Additionally, as
a percentage of net sales, lower store labor expenses were offset by higher
insurance expense and higher marketing expense.

The effective income tax rate in the quarter was 36.4% as compared to 37.4% in
the first quarter of fiscal 2012. The decrease in the effective tax rate was
due primarily to foreign tax benefits associated with the Company’s global
sourcing efforts and favorable resolution of uncertain state tax positions,
which were partially offset by a decrease in federal jobs tax credits.

Net income for the quarter was $80.3 million compared with net income of $80.4
million for the first quarter of fiscal 2012.

The Company’s merchandise inventories at November 24, 2012, were $1.59 billion
compared with $1.30 billion at November 26, 2011. Average inventory per store
at the end of the quarter was 15.1% higher than the average inventory per
store at the end of the first quarter of fiscal 2012. The increase in
inventories was the result of investments to expand the Company’s consumable
categories, primarily health and beauty aids and food assortments.

In the quarter, capital expenditures were $196.4 million compared with $130.9
million in the first quarter of fiscal 2012. The growth in capital
expenditures related to increased investments in new stores.

During the first quarter of fiscal 2013, the Company repurchased approximately
0.4 million shares of its common stock for a total cost of $25.0 million. As
of November 24, 2012, the Company had the authorization to purchase up to an
additional $120.8 million of its common stock.


“The holiday selling season proved to be more challenging than we expected as
customers faced increasing financial uncertainty. Comparable stores sales for
December increased about 2.5%, driven primarily by strong, double-digit sales
of Consumables. Discretionary categories continued to be pressured, reflecting
ongoing consumer caution,” said Levine. “Despite the ongoing economic
uncertainty, we expect that the investments we have made in traffic-driving
categories will continue to build sales momentum through January and February,
as customers focus even more on basic needs.”

The Company anticipates that many of the sales and margin trends that occurred
in the first quarter will continue in the second quarter. Reflecting December
results, the Company expects that comparable store sales will increase between
4% and 5% in the second quarter of fiscal 2013 and that earnings per diluted
share will be between $1.18 and $1.28 per share compared with $1.15 per share
in the second quarter of fiscal 2012. Consistent with the National Retail
Federation Calendar, the second quarter of fiscal 2013 will include an extra
week. The extra week is expected to add approximately $0.09 of earnings per
diluted share to the year, which is included in the Company’s earnings

Reflecting the Company’s performance year-to-date through December, the
Company now expects that diluted earnings per share in fiscal 2013 will be
between $3.95 and $4.20 compared to $3.58 in fiscal 2012. The Company's
outlook for fiscal 2013 is based on the following assumptions which may or may
not prove valid:

  *An increase in comparable store sales of between 4% and 6%;
  *Approximately 500 new store openings and 70-90 store closings;
  *Gross margin pressure driven primarily by an expanding mix of lower-margin
  *SG&A leverage driven by a strong increase in comparable store sales;
  *An effective income tax rate between 36% and 37%;
  *Weighted average diluted shares of approximately 116 million; and
  *Capital expenditures of between $600 million and $650 million to support
    new store openings, store renovations, merchandising initiatives, and
    expansion of the Company’s supply chain.

Cautionary Statements

Certain statements contained in this press release are “forward-looking
statements” that are subject to the safe harbor provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements
address certain plans, activities or events which the Company expects will or
may occur in the future and relate to, among other things, the state of the
economy, the Company’s investment and financing plans, net sales, comparable
store sales, cost of sales, SG&A expenses, earnings per diluted share,
dividends and share repurchases. Various risks, uncertainties and other
factors could cause actual results to differ materially from those expressed
in any forward-looking statement. Consequently, all of the forward-looking
statements made by the Company in this and in other documents or statements
are qualified by factors, risks and uncertainties, including, but not limited
to, those set forth under the headings titled “Cautionary Statement Regarding
Forward-Looking Statements” and “Risk Factors” in the Company’s most recent
Annual Report on Form 10-K and subsequent Quarterly Report on Form 10-Q filed
with the Securities and Exchange Commission up to the date of this release.

Readers are cautioned not to place undue reliance on these forward-looking
statements, which speak only as of the date of this press release. The Company
does not undertake to update or revise these 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, except as may be required
by law.

Earnings Conference Call Information

The Company plans to host a conference call with investors today, January 3,
2013, at 10:00 a.m. ET to discuss the results. The Company will also provide
an update on various business initiatives and discuss plans and expectations
for the rest of fiscal 2013. After some prepared remarks by management,
participants will have an opportunity to ask questions. The Company’s
responses to questions, as well as other matters discussed during the
conference call, may include information that has not been disclosed

If you wish to participate, please call (888) 329-8903 for domestic US calls
and (719) 325-2320 for international calls at least 10 minutes before the call
is scheduled to begin. The passcode for the conference call is 7056645 or

A live webcast of the conference call can be accessed at the following link:


A replay of the webcast will be available at the address noted above after
11:00 a.m. ET, January 3, 2012.

About Family Dollar

For more than 50 years, Family Dollar has been providing value and convenience
to customers in easy-to-shop neighborhood locations. Family Dollar’s mix of
name brands and quality, private brand merchandise appeals to shoppers in more
than 7,500 stores in rural and urban settings across 45 states. Helping
families save on the items they need with everyday low prices creates a strong
bond with customers, who often refer to their neighborhood store as “my Family
Dollar.” Headquartered in Matthews, North Carolina, just outside of Charlotte,
Family Dollar is a Fortune 300, publicly held company with common stock traded
on the New York Stock Exchange under the symbol FDO. For more information,
please visit

                       For the First Quarter Ended*
(in thousands,         November 24,     % of Net       November 26,   % of Net
except per share     2012            Sales         2011          Sales
Net sales              $  2,421,688     100.00  %      $  2,148,287   100.00 %
Cost of sales            1,594,894    65.86   %        1,390,715  64.74  %
Gross profit              826,794       34.14   %         757,572     35.26  %
Selling, general
and                      699,825      28.90   %        627,585    29.21  %
Operating profit          126,969       5.24    %         129,987     6.05   %
Investment                75            0.00    %         234         0.01   %
Interest expense          7,122         0.29    %         6,712       0.31   %
Other income             6,362        0.26    %        4,923      0.23   %
Income before             126,284       5.21    %         128,432     5.98   %
income taxes
Income taxes             46,005       1.90    %        48,082     2.24   %
Net income             $  80,279        3.32    %      $  80,350      3.74   %
Net income per
common share -         $  0.69                         $  0.68
Weighted average          115,521                         117,649
shares - basic
Net income per
common share -         $  0.69                         $  0.68
Weighted average          116,197                         118,591
shares - diluted
declared per           $  0.21                         $  0.18
common share
*Certain reclassifications of the amounts for fiscal 2012 have been made to
conform to the presentation for fiscal 2013.

                                                   As of
                                                   November 24,   November 26,
(in thousands, except per share and share amounts) 2012           2011
Current assets:
   Cash and cash equivalents                       $  112,267     $  103,706
   Short-term investment securities                   9,560          51,630
   Restricted cash and investments                    80,884         —
   Merchandise inventories                            1,592,068      1,301,577
   Deferred income taxes                              71,557         56,477
   Income tax refund receivable                       —              7,181
   Prepayments and other current assets              75,082        77,397
               Total current assets                   1,941,418      1,597,968
Property and equipment, net                           1,636,189      1,355,287
Investment securities                                 23,489         94,543
Other assets                                         86,350        73,353
Total assets                                       $  3,687,446   $  3,121,151
Liabilities and Shareholders' Equity
Current liabilities:
   Short-term borrowings                           $  209,000     $  75,000
   Current portion of long-term debt                  16,200         16,200
   Accounts payable                                   752,231        719,175
   Accrued liabilities                                316,347        271,262
   Income taxes                                      32,618        7,753
               Total current liabilities              1,326,396      1,089,390
Long-term debt                                        500,158        516,207
Other liabilities                                     277,738        263,245
Deferred gain                                         154,611        —
Deferred income taxes                                 75,950         104,608
Commitments and contingencies
Shareholders' equity:
   Preferred stock, $1 par; authorized and            —              —
   unissued 500,000 shares
   Common stock, $.10 par; authorized 600,000,000     11,993         11,897
   Capital in excess of par                           282,957        243,414
   Retained earnings                                  1,290,436      941,572
   Accumulated other comprehensive loss               (1,795)        (6,697)
   Common stock held in treasury, at cost            (230,998)     (42,485)
               Total shareholders' equity            1,352,593     1,147,701
Total liabilities and shareholders' equity         $  3,687,446   $  3,121,151

                                                   For the First Quarter Ended
(in thousands)                                     November 24,   November 26,
                                                   2012           2011
Cash flows from operating activities:
   Net income                                      $ 80,279       $ 80,350
   Adjustments to reconcile net income to net
   cash provided by operating activities:
        Depreciation and amortization                57,175         49,135
        Amortization of deferred gain                (2,857   )     —
        Deferred income taxes                        17,919         28,595
        Excess tax benefits from stock-based         (12,654  )     (10,572  )
        Stock-based compensation                     4,413          5,423
        Loss on disposition of property and          2,860          7,173
        including impairment
        Changes in operating assets and
                  Merchandise inventories            (165,906 )     (146,917 )
                  Prepayments and other current      (27,472  )     (5,953   )
                  Other assets                       (2,073   )     616
                  Accounts payable and accrued       10,003         (54,325  )
                  Income taxes                       761            5,924
                  Other liabilities                 9,784       (6,172   )
                                                    (27,768  )   (46,723  )
Cash flows from investing activities:
   Purchases of investment securities                (10,720  )     (12,182  )
   Sales of investment securities                    7,542          68,592
   Net change in restricted cash                     46,009         —
   Capital expenditures                              (196,386 )     (130,862 )
   Net proceeds from sale-leaseback                  1,132          —
   Proceeds from dispositions of property and       162          96       
                                                    (152,261 )    (74,356  )
Cash flows from financing activities:
   Revolving credit facility borrowings              598,000        173,000
   Repayment of revolving credit facility            (404,000 )     (98,000  )
   Repayment of long-term debt                       (16,200  )     (16,200  )
   Repurchases of common stock                       (24,980  )     (27,435  )
   Change in cash overdrafts                         43,138         41,819
   Proceeds from exercise of employee stock          15,578         20,752
   Excess tax benefits from stock-based              12,654         10,572
   Payment of dividends                             (24,227  )   (21,128  )
                                                    199,963     83,380   
Net change in cash and cash equivalents              19,934         (37,699  )
Cash and cash equivalents at beginning of period    92,333       141,405  
Cash and cash equivalents at end of period         $ 112,267     $ 103,706  

Selected Additional Information
                                    For the First Quarter Ended
                                    November 24,    November 26,
(in thousands)                      2012           2011           % Change 
Consumables                         $ 1,789,285     $ 1,509,536     18.5     %
Home products                         242,335         246,000       -1.5     %
Apparel and accessories               178,026         186,214       -4.4     %
Seasonal and electronics             212,042       206,537      2.7      %
TOTAL                               $ 2,421,688     $ 2,148,287     12.7     %
                                    For the First Quarter Ended
                                    November 24,    November 26,
                                    2012           2011        
Beginning Store Count                 7,442           7,023
New Store Openings                    125             101
Store Closings                       (1        )    (4        )
Ending Store Count                    7,566           7,120
Total Square Footage (000s)           64,927          60,846
Total Selling Square Footage          54,245          50,760


Family Dollar Stores, Inc.
Investor Contact:
Kiley F. Rawlins, CFA, 704-849-7496
Media Contact:
Josh Braverman
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