Family Dollar Profits Fall 30%

Profits for the fourth quarter ending Aug. 27 fell to $29.2 million, or 18 cents per share, down from $41.7 million, or 25 cents per share, for the same period a year earlier. The earnings were just one cent above analyst estimates. Sales for the quarter rose 8% to $1.4 billion from $1.3 billion in the fourth quarter of 2004 while year-over-year same-store sales showed a disappointing 0.6% increase.

The Matthews, NC discount chain, which operates about 5,900 stores, said lower margin consumables helped drive the sales increase, but while the average customer spent more per transaction, the number of transactions fell in comparable stores.

"Fiscal 2005 was a challenging year for our customer and for our company," said chairman and chief executive officer Howard R. Levine, in announcing the quarterly results. "Our customers have been running out of money and making fewer trips during the month, but are spending more to replenish when they do have the cash."

Rising fuel costs combined with increased expenses related to the installation of coolers in about 2,500 stores long with an initiative to encourage growth in urban markets were largely to blame for the drop in earnings, company officials said.

In a bid to strengthen the bottom line, Family Dollar said it will refocus its efforts on its existing outlets and will curtail its planned store openings to 400 for the next fiscal year, a decline from 500 stores opened during fiscal 2005.

The deep discount retailer earned $217.5 million, or $1.30 per share, on sales of $5.82 billion in fiscal 2005 compared to $285 million, or $1.50 per share, on revenues of $5.28 billion in the previous year.