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Family Dollar to close 370 stores, cut jobs and reduce prices after tough Q2

BY Dan Berthiaume

Matthews, N.C. – Family Dollar Stores Inc. plans to close about 370 underperforming stores , cut jobs and lower prices on 1,000 basic items on the heels of a disappointing second quarter. The retailer is also slowing its new store growth beginning in fiscal 2015 to bolster its return on investment. It now anticipates opening 350 to 400 new stores as opposed to approximately 525 stores in 2014.

Family Dollar’s net income in the quarter ended March 1, 2014, dropped 35% to $90.9 million from $140.1 million in the year-ago period. Net sales decreased 6.1% to $2.7 billion, from $2.9 billion.

Same-store sales declined 3.8% as a result of decreased customer transactions, partially offset by an increase in the average customer transaction value. Family Dollar cited the extra week in last year’s quarter, as well as severe weather, holiday promotions and a challenging consumer environment, as impacting performance.

“Our second quarter results did not meet our expectations,” said Howard R. Levine, chairman and CEO. “The 2013 holiday season was challenged by a more promotional competitive environment and a more financially constrained consumer. In addition, like many retailers, our second quarter results were significantly impacted by severe winter weather, which resulted in numerous store closings, disrupted merchandise deliveries and higher than expected utility and store maintenance expenses.”

The chief executive went on to say that the company was not satisfied with its performance and would implement a number of initiatives to improve things, including the price cuts, store closings and staff reductions along with re-aligning key organizational functions. The job cuts and store closures are expected to reduce annual operating costs by $40 million to $45 million beginning third quarter of fiscal 2014.

Family Dollar expects to record an estimated $85 million to $95 million restructuring charge in the second half of fiscal 2014 related to the workforce reductions and store closures.

For the third quarter of fiscal 2014, Family Dollar expects that same-store sales will decline in the low-single-digit range and for the fourth quarter of fiscal 2014, the company expects that same-store sales will be flat to up slightly. Family Dollar also expects a low-single digit increase in net sales during the full fiscal year.

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Walmart renews organic emphasis with Wild Oats

BY CSA STAFF

The Wild Oats brand will begin appearing on Walmart shelves this month as the retailer plans to offer 100 low priced organic dry grocery items.

The products are said to be priced at least 25% less than comparable organic items offered at other retailer, according to Walmart. Roughly 90% of the products will be branded as Wild Oats Marketplace Organic and include canned vegetables, spices and other dry grocery products. Walmart also plans to offer items branded simply as Wild Oats Marketplace which will include products with simple and real ingredients such as ready-to-prepare skillet meals. A third variation called Wild Oats Marketplace Original said to offer new and uniquely formulate items will be available later this year, according to Walmart.

“We know our customers are interested in purchasing organic products and, traditionally, those customers have had to pay more,” said Jack Sinclair, EVP of grocery at Walmart U.S. “We are changing that and creating a new price position for organic groceries that increases access. This is part of our ongoing effort to use our scale to deliver quality, affordable groceries to our customers.”

The Wild Oats brand, while familiar to those in the retail industry, will be less familiar to Walmart shoppers. Wild Oats was an operator of 110 natural and organic food stores until 1997 when it was acquired by Whole Foods. Entities controlled by investor Ron Burkle’s Yucaipa Companies owned 18% of Wild Oats at the time. The Federal Trade Commission sought to block the deal, but by late 2007 Whole Food prevailed and the following year the Wild Oats banner vanished from the retail landscape as stores were converted to the Whole Food name. The Wild Oats name resurfaced in December 2011 when Burkle’s Yucaipa Companies created Wild Oats Marketing, LLC., which is led by CEO Tom Casey.

“By partnering with Walmart, Wild Oats is starting a movement that makes it easier than ever for customers to access affordable organic and natural products,” Casey said. “Our availability at Walmart will allow us to finally pass along scalable savings directly to consumers. We are reinvigorating our brand by bringing great tasting Wild Oats products to more customers than ever before.”

The introduction of the Wild Oats brand is reminiscent of a similar Organic push Walmart made in 2006. At the time, an expansion of organic offerings in the fresh department were supported with a national ad campaign featuring the tag line, “What will you bring to the table?”

That same year, Walmart touted the introduction of organic baby products such as infant formulas and Gerber brand food along with organic cotton apparel. Then, as now, the value proposition to shoppers was all about putting organic products within reach of cost conscious shoppers.

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eBay and Icahn call a truce

BY CSA STAFF

It looks like the battle between eBay and investor Carl Icahn is over — for the time being. Icahn is withdrawing his proposal to separate the company’s PayPal business as well as his two nominees to the company’s board of directors.

eBay reportedly reached an agreement with Icahn, ending the proxy contest before the upcoming annual meeting of stockholders.

The company said it has agreed to Icahn’s suggestion to appoint business executive David Dorman as an independent director to its board — a move which will expand the number of independent directors to 10 on the 12-member board. The other two directors are eBay founder and chairman Pierre Omidyar, the company’s largest shareholder, and company president and CEO John Donahoe.

Dorman is a founding partner of Centerview Capital Technology. He has more than 38 years of senior executive, operational, board and investment experience. He is currently chairman of the board of CVS Caremark. Dorman was a board member of Motorola beginning in 2006 and served as chairman of the board from 2008 until 2012. After the separation of Motorola Mobility and Motorola Solutions, Dorman became lead independent director of Motorola Solutions. He also serves on the boards of YUM! Brands and the Georgia Tech Foundation in Atlanta.

Prior to Centerview, Dorman was chairman and CEO of AT&T. During his tenure there, he led the company through a profound reinvention and transformation prior to completing the merger of AT&T and SBC Communications in November 2005. Dorman joined AT&T as president in December 2000 and was named chairman and CEO in November 2002.

“We are very pleased to have reached this agreement with Carl, settling proxy issues and enabling our board and management team to focus our full attention on a goal every shareholder agrees on — growing PayPal and eBay and delivering sustainable shareholder value,” said Donahoe. “As a result of our conversations, it became clear that Carl and I strongly agree on the potential of PayPal and our company. I respect Carl’s willingness to work together to drive sustainable shareholder value today and into the future. His record shows that he has done this with many other companies in the past.”

Icahn has reportedly signed a confidentiality agreement covering any non-public information that directors and certain officers of the company may share with him. In addition, the company agreed not to adopt a policy precluding such persons from speaking to Icahn, and said that it would advise to speak to Icahn if they are willing to do so.

“We are happy to have reached this détente with eBay and believe that Dave Dorman will be a great addition to the company’s board of directors,” said Icahn. “As chairman of Motorola, Mr. Dorman, working in tandem with our board nominees, guided the company through the successful separation of its mobile device and home businesses, which greatly enhanced shareholder value.”

Regarding the confidentiality agreement, Icahn said that they have entered into similar agreements in the past with other companies, adding “as results show, they have worked with great success.”

“Throughout the last week I have had a number of conversations with John,” added Icahn. “We both strongly believe in the great potential of eBay and PayPal, and I have found a number of his ideas to be extremely compelling.”

He has not budged, however, in his belief that eBay would benefit from the separation of PayPal at some point in the near future and said he intends to continue pressing his case through confidential discussions with the company.

“While John has made no commitments regarding such a separation, he and I have agreed to meet regularly when he is in New York to discuss strategic alternatives,” said Icahn. “We look forward to working with the eBay’s board of directors and management with a common objective of creating sustainable value for all shareholders. Our record shows that our involvement with boards and management has greatly enhanced long term value for all shareholders, and we hope and believe this will continue with eBay.”

The company confirmed that its first quarter earnings call will take place at 2 p.m. PDT April 29, and that its annual meeting will be held at 8 a.m. PDT May 13.

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