Dollar General ‘Firmly’ Committed to Family Dollar

Dollar General Corp. said it’s “firmly” committed to buying smaller rival Family Dollar Stores Inc. (FDO) after its $9 billion offer was rejected in favor of a lower bid on antitrust concerns.

Dollar General reaffirmed its intentions as it reported second-quarter sales that fell short of analysts’ estimates. Sales rose 7.5 percent to $4.72 billion in the period ended Aug. 1, Dollar General said in a statement. Analysts anticipated $4.77 billion. Earnings of 83 cents a share matched projections.

The Goodlettsville, Tennessee-based retailer is trying to keep its perch atop the dollar-store industry after Family Dollar’s board spurned its offer last week and reaffirmed its support of a deal with Dollar Tree Inc. (DLTR) A merger between Dollar General’s two peers would create a new market leader, intensifying competition while Wal-Mart Stores Inc. is pushing smaller-format stores.

“We continue to believe the potential antitrust issues are manageable and that our transaction as proposed is both superior and achievable,” Dollar General Chief Executive Officer Rick Dreiling said in the statement.

Dollar General offered to buy Family Dollar for $78.50 a share in cash last week, topping Dollar Tree’s $74.50 a share cash-and-stock offer made last month. Family Dollar’s shares closed at $79.80 yesterday.

Dollar General’s current proposal to close as many as 700 stores probably won’t pass antitrust hurdles, Family Dollar has said. However, Family Dollar is willing to consider Dollar General’s offer if it agrees to sell as many stores as regulators would require, people familiar with the matter said last week.

Sales Pick Up

Sales growth has picked up this month after slowing in June and July, Dollar General said today. The chain forecast same-store sales to gain as much as 3.5 percent this year, , down from 4 percent previously. Revenue on that basis -- a key measure for retailers because it only includes established locations -- rose 1.8 percent in the first half.

The company also reiterated a June forecast for sales to increase as much as 9 percent this year and for earnings per share to be in a range of $3.45 to $3.55.

Dollar General’s shares rose 0.8 percent to $64.20 at the close in New York. The stock has gained 6.4 percent this year, less than the 8 percent increase for the Standard & Poor’s 500 Index.

The pursuit of Family Dollar has created tension between Dollar General and Dollar Tree. The companies have publicly traded barbs, accusing the other of misstating the facts surrounding a meeting on June 19 to discuss a possible combination.

Dollar Stores have been a bright spot in the retail industry, which is suffering amid a reluctance to spend by shoppers as wage gains remain sluggish. Wal-Mart, Target Corp. and Macy’s Inc. have all reported disappointing results this month.

To contact the reporter on this story: Matt Townsend in New York at mtownsend9@bloomberg.net

To contact the editors responsible for this story: Nick Turner at nturner7@bloomberg.net Bruce Rule, John Lear

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