Family Dollar Stores, Inc. reported that for the first quarter of fiscal 2013 ended November 24, 2012, net sales increased to $2.42 billion and net income per diluted share for the quarter increased to $0.69.
“The investments we have made to increase our relevance to the customer are delivering results. We are driving more traffic, and we are increasing our market share,” said Howard R. Levine, Chairman and CEO. “While the near-term economic environment remains difficult to predict, I continue to be excited about the long-term opportunity for our business. We are seeing tangible benefits from our margin-enhancing investments in global sourcing and private brands, and as we work to drive further benefit from the investments we are making to expand profitability, I remain confident that our efforts will deliver stronger results as we progress through fiscal 2013 and beyond.”
Fiscal 2013 First Quarter Results
Commenting on the first quarter results, Levine said, “Early results from our sales-driving initiatives exceeded our expectations in the first quarter, resulting in more gross margin pressure than anticipated. This mix pressure, combined with expected headwinds from insurance expense, resulted in earnings that were at the low end of our guidance.”
Net sales for the quarter increased 12.7% to $2.42 billion compared to $2.15 billion in the first quarter of fiscal 2012. Sales were strongest in the Consumables category, which increased 18.5% during the quarter, driven primarily by strong growth in tobacco, food and health and beauty aids. During the quarter, the Company opened 125 new stores, closed one store, and renovated relocated or expanded 169 stores.
Comparable store sales for the quarter increased 6.6% as a result of increased customer traffic and an increase in the average customer transaction value.
Gross profit for the quarter increased 9.1% to $826.8 million, or 34.1% of net sales, compared to $757.6 million, or 35.3% of net sales, in the first quarter of fiscal 2012. As a percentage of sales, the impact of stronger sales of lower-margin consumables, higher markdowns and increased inventory shrinkage was partially offset by higher markups and lower freight expense.
Selling, general and administrative (SG&A) expenses, as a percentage of net sales, were 28.9% in the quarter compared to 29.2% in the first quarter of fiscal 2012. Most expenses were leveraged during the quarter. Additionally, as a percentage of net sales, lower store labor expenses were offset by higher insurance expense and higher marketing expense.
The effective income tax rate in the quarter was 36.4% as compared to 37.4% in the first quarter of fiscal 2012. The decrease in the effective tax rate was due primarily to foreign tax benefits associated with the Company’s global sourcing efforts and favorable resolution of uncertain state tax positions, which were partially offset by a decrease in federal jobs tax credits.
Net income for the quarter was $80.3 million compared with net income of $80.4 million for the first quarter of fiscal 2012.
The Company’s merchandise inventories at November 24, 2012, were $1.59 billion compared with $1.30 billion at November 26, 2011. Average inventory per store at the end of the quarter was 15.1% higher than the average inventory per store at the end of the first quarter of fiscal 2012. The increase in inventories was the result of investments to expand the Company’s consumable categories, primarily health and beauty aids and food assortments.
In the quarter, capital expenditures were $196.4 million compared with $130.9 million in the first quarter of fiscal 2012. The growth in capital expenditures related to increased investments in new stores.
During the first quarter of fiscal 2013, the Company repurchased approximately 0.4 million shares of its common stock for a total cost of $25.0 million. As of November 24, 2012, the Company had the authorization to purchase up to an additional $120.8 million of its common stock.
About Family Dollar
For more than 50 years, Family Dollar has been providing value and convenience to customers in easy-to-shop neighborhood locations. Family Dollar’s mix of name brands and quality, private brand merchandise appeals to shoppers in more than 7,500 stores in rural and urban settings across 45 states.
Helping families save on the items they need with everyday low prices creates a strong bond with customers, who often refer to their neighborhood store as “my Family Dollar.” Headquartered in Matthews, North Carolina, just outside of Charlotte, Family Dollar is a Fortune 300, publicly held company with common stock traded on the New York Stock Exchange under the symbol FDO.