Profit grew by nearly 10% to $123.2 million and sales advanced 8.3% to nearly $2.3 billion, as Family Dollar remained on a consistent growth trajectory during its second quarter ended Feb. 27. Earnings per share for the period increased 21% to 98 cents compared with 81 cents in the second quarter the prior year.
“Over the last several years, we have accelerated capability-building investments and increased our efforts to improve the in-store shopping experience. These investments have provided a solid foundation for the successful launch of our strategic plan to re-accelerate revenue growth, expand operating margins and optimize our capital structure,” said Howard Levine, chairman and CEO of Family Dollar. “Our performance year-to-date illustrates that we are effectively leveraging these enhanced capabilities and executing well against our business plan and delivering superior value for shareholders.”
The second quarter saw the company again produce solid same-store sales growth of 5.1%, which it said was almost entirely the result of more customers shopping its stores as determined by the number of transactions. A modest increase in the value of the average customer transaction also contributed to the comp gain. Sales during the quarter were strongest in the consumable and seasonal categories, according to the company.
The rate of profitability improved slightly, as Family Dollar’s gross margins for the second quarter were 35.7% compared with 35.4% the prior year due largely to less shrinkage, which more than offset higher transportation costs. The shrinkage reduction occurred even though average inventories per store increased by 10% as Family Dollar stocked up on consumables. The company’s expense rate was essentially flat with the prior year at 26.82% compared with 26.77%.
Looking forward to the back half of its fiscal year Family Dollar is expecting continued growth and improved profits. Third-quarter and full-year comps are projected to be in the range of 5% to 7%, and additional store growth is planned. At the mid point of its fiscal year, Family Dollar has opened 146 new stores, renovated 313 stores and closed 43 others as part of a full-year plan that envisions the addition of 300 new stores and 80 to 100 closings. The company ended the second quarter with approximately 6,800 units.
The additional square footage, expectations of same store sales growth are forecast to result in third quarter earnings per share of 92 cents to 97 cents, compared to 77 cents last year and full year profitability in a range of $3.13 to $3.23 a share compared with $2.62 last year.