Family Dollar Sales, Profit In Line With Expectations

Family Dollar Stores Inc. on Wednesday reported sales and profit that met Wall Street expectations, despite severe winter weather at the end of February and lower transaction values.

"While our trends in late-February were adversely impacted by severe winter weather, our sales trends in March rebounded nicely, reflecting both improved traffic trends and the benefit of an earlier Easter," said Family Dollar Chief Executive Howard R. Levine in a release.

Family Dollar declined to offer guidance for the year, citing its impending deal to be bought by Dollar Tree Inc., but said its same-store sales grew a strong 3.7% in March.

The results come as Family Dollar and Dollar Tree near regulatory approval for their merger.

On Tuesday, Dollar Tree said the Federal Trade Commission has substantially completed its review of the acquisition and identified about 340 stores for divestiture. Dollar Tree intends to close the merger in May but said the timing is subject to certain factors beyond its control, including FTC approval.

After the merger, Dollar Tree will have about 13,000 stores and $19 billion in revenue and will likely overtake Dollar General Corp. as the biggest dollar chain in the U.S. Dollar General, which has 11,789 stores and posted $18.9 billion in revenue in 2014, had also pursued a deal with Family Dollar, offering about $9 billion in cash for the retailer, but was rebuffed by the company over antitrust concerns.

The consolidation comes as consumers remain price-conscious amid uneven economic recovery, forcing discount retailers to squeeze more costs out of their operations to keep prices low.

Family Dollar, for its part, has moved to a more promotional model to one that depends on everyday lower prices. The strategy has squeezed margins, though the company said it is now seeing key categories stabilize and customer traffic trends improve.

In the latest quarter, margins edged up to 33.3% from 33.2% a year earlier.

Same-store sales grew 0.5% as an increase in the number of customer transactions was offset by a decrease in transaction value. Consensus Metrix had forecast 1.8% growth in the metric.

Overall, for the quarter ended Feb. 28, Family Dollar posted a profit of $76.7 million, or 67 cents a share, down from $90.9 million, or 80 cents a share, a year earlier. Excluding merger fees and other special items, earnings were 74 cents a share.

Net sales grew 3% to $2.8 billion.

Analysts projected earnings of 73 cents a share and revenue of $2.8 billion.

Write to Chelsey Dulaney at [e-mail]

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