Family Dollar to Cut Jobs, Close 370 Stores

Inside A Family Dollar Store Ahead Of Earnings Figures
Ben Torres/Bloomberg via Getty Images
MATTHEWS, N.C. -- Family Dollar plans to cut some jobs and close about 370 underperforming stores as it tries to reverse sagging sales and earnings. The discount store operator will also lower prices on about 1,000 basic items.

Family Dollar Stores (FDO) didn't provide details on how many jobs were expected to be eliminated.

The chain said the store closings and job cuts should reduce annual operating expenses by $40 million to $45 million, starting with the fiscal third quarter. Family Dollar currently has more than 8,100 stores in 46 states.

The job cuts and store closings are estimated to result in an approximately $85 million to $95 million restructuring charge during fiscal 2014's second half.

The Matthews, N.C., company also said it will slow new store openings beginning in fiscal 2015 to bolster its return on investment. It now anticipates opening 350 to 400 new stores. In fiscal 2014 it had about 525 new stores.

The announcement came as Family Dollar reported its profit and revenue declined in the fiscal second quarter, which was hampered by bad winter weather.

Chairman and CEO Howard Levine said in a statement that the poor weather led to numerous store closings,
disrupted merchandise deliveries and higher-than-expected utility and store maintenance expenses.

The quarter that ended March 1 included the critical holiday shopping season, which Levine said was "challenged" because shoppers had tighter financial constraints and rivals were more promotional.

Family Dollar reported that its net income dropped to $90.9 million, or 80 cents a share, from $140.1 million, or $1.21 a share, a year earlier. Revenue fell to $2.72 billion from $2.89 billion. Analysts surveyed by FactSet expected earnings of 90 cents a share on revenue of $2.77 billion.

Last year's quarter included one extra week.

Family Dollar said it believes the bad winter weather hurt its earnings by at least 5 cents a share.

Sales at stores open at least a year, a key gauge of a retailer's health, declined 3.8 percent. This figure excludes results from stores recently opened or closed.

Levine said the company's quarterly performance was below its expectations and that it's started a review of the business to increase operational efficiencies and boost its financial performance. Levine said the price cuts, store closings and job eliminations are part of actions it is taking immediately to lift its performance during the review.

Looking ahead, Family Dollar anticipates third-quarter adjusted earnings of 85 cents to 95 cents a share. Fourth-quarter adjusted earnings are expected in a range of 75 cents to 85 cents a share. Fiscal 2014 adjusted earnings are predicted between $3.05 and $3.25 a share.

Wall Street is calling for third-quarter earnings of 98 cents a share, fourth-quarter earnings of 84 cents a share and full-year earnings of $3.38 a share.

Shares of Family Dollar rose 48 cents to $59.55 in morning trading Thursday.

Increase your money and finance knowledge from home

Introduction to Value Investing

Are you the next Warren Buffett?

View Course »

Investment Strategies

What's your investing game plan?

View Course »

Add a Comment

*0 / 3000 Character Maximum


Filter by:

Family dollar sells low quality plastic junk that will end up in a landfill after one week of use.

April 12 2014 at 10:35 PM Report abuse rate up rate down Reply

Filthy stores, rude employees and high prices. Another case of greed above all. Hope they go out of business!

April 11 2014 at 12:25 PM Report abuse +1 rate up rate down Reply

Don't understand a company wide store closings based on one quarter during the winter. Their profits still look sound and would like to see their cash flow projections. Another example of how successful, profitable businesses have to fire people to get where Wall Street wants to see them.

April 11 2014 at 8:06 AM Report abuse +1 rate up rate down Reply

The prices have steadily gone up and the selection has declined.

April 10 2014 at 11:28 PM Report abuse +1 rate up rate down Reply

Well that just stinks! There go some more good paying middle class jobs at 8.00 per hour!

April 10 2014 at 10:31 PM Report abuse +1 rate up rate down Reply