Jan. 5 (Bloomberg) -- Family Dollar Stores Inc., the second-biggest dollar-store chain in the U.S., fell the most in more than two years in New York trading after its second-quarter forecast fell short of analysts’ projections.
The shares dropped 8.8 percent after the chain said profit will amount to as much as 97 cents a share. That compared with the $1 average of predictions compiled by Bloomberg. The Matthews, North Carolina-based retailer also cut the top end of its annual forecast to $3.23 from $3.24.
Selling, general and administrative costs climbed 9 percent and equaled almost one-third of revenue. The discounter, led by Chief Executive Officer Howard Levine, has spent more to open new stores and renovate others. Family Dollar will remodel 600 stores by the end of August, Levine said today on a conference call.
“They’re doing a lot of remodeling in the chain, so it could be that there’s just a lot of volatility here,” said Neil Currie, an analyst at UBS Securities LLC in Stamford, Connecticut. Currie rates the stock “buy.”
Family Dollar dropped $4.32 to $44.99 at 4:15 p.m. in New York Stock Exchange composite trading. The decline was the biggest since October 2008.
Other discounters also fell. Dollar General Corp., the biggest U.S. dollar-store chain, declined 1.4 percent to $30.10, while Chesapeake, Virginia-based Dollar Tree Inc. slumped 4.9 percent to $52.08.
Family Dollar’s profit rose 9.9 percent in the quarter ended Nov. 27 to $74.3 million, or 58 cents a share, from $67.6 million, or 49 cents, a year earlier. Analysts had projected earnings of 61 cents a share, according to the average of estimates compiled by Bloomberg.
Family Dollar operates more than 6,800 outlets across the U.S. The company’s first-quarter sales rose 9.5 percent to $2 billion.
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