Family Dollar Stores, Inc. (NYSE:FDO) Witness Decline in Profit

Family Dollar Stores, Inc. (NYSE:FDO) said that its second-quarter profit witnessed a decline of 15.6%. This could be the last quarterly report of Family Dollar Stores as a public company. Family Dollar Stores is the no. 2 dollar store chain within the USA.

Why are analyst so optimistic about FDO?

However, the same-store sales of the company witnessed a meager rise of 0.5% in the second quarter. The company says that this might be because of an unexpected weather pattern across the country during these times. February was unusually cold, which eventually led to a fall in the average money spent by a customer on their stores.

The numbers differ from what analysts had to say. Analysts at Consensus Metrix, had expected Family Dollar Stores to achieve a growth of nearly 1.8%.

Family Dollar Stores shall soon accept a deal of merger. Shareholders of Family Dollar Stores had earlier approved an $8.5 billion cash-and-stock offer from the company Dollar Tree, Inc. (NASDAQ:DLTR) during the month of January. Earlier on, rivals Dollar General Corp. (NYSE:DG) had offered an amount less than what Dollar General had to provide, in an attempt to take over the company.

Antitrust regulators are still in the process of reviewing the deal. However, upon the instructions of U.S Federal Trade Commission, Dollar Tree has to divest about 340 stores to gain the approval from them for the merger. These 340 stores would be identified by the Federal Trade Commission themselves.

Should the deal and merger be successful, Dollar Tree would then be able to topple Dollar General on becoming the largest discount retailer in the United States. Dollar Tree would then have more than 13,000 stores all across the country and Canada. The expected annual sales are expected to cross the $18 billion mark after that. Dollar Tree has stated that it expects the deal to be completed during May.

The net income of Family Dollar Stores, Inc. (NYSE:FDO) fell to nearly $76.7 million in the second quarter ended February 28, from $90.9 million. In terms of share, it fell from 80 cents to 67 cents per share. However, revenue rose to $2.80 billion form an earlier $2.72 billion.

About the Author

Michael joined US Markets Daily in 2009 and is a national news reporter focusing on economic issues, data analysis and the financial health of state and local governments.

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