MATTHEWS, N.C. — Following a second quarter in which results failed to meet expectations, Howard R. Levine, chairman and chief executive officer of Family Dollar Stores, Inc., announced April 10 that the discount retailer is taking “immediate, strategic actions” to improve the company’s performance.
“First, we have made a significant investment to lower prices on about 1,000 basic items,” Mr. Levine said. “Second, we are reducing our cost structure through the optimization of our workforce. Third, we will close approximately 370 underperforming stores. Once complete, our workforce reduction efforts and store closures are expected to result in $40 million to $45 million of annualized operating profit benefit, beginning in the third quarter of fiscal 2014. Lastly, we intend to slow new store growth beginning in fiscal 2015 to improve our return on investment. We are confident that these steps will position Family Dollar to deliver stronger returns for our shareholders.”
As part of the new store growth slowdown, Family Dollar said it now plans to open 350 to 400 new stores in fiscal 2015, down from about 525 new stores in fiscal 2014.
The company also now expects to record an estimated $85 million to $95 million restructuring charge in the second half of fiscal 2014 related to the workforce reductions and store closings.
In the second quarter ended March 1, net income at Family Dollar was $90,869,000, equal to 80c per share on the common stock, down 35% from $140,145,000, or $1.21 per share, in the same period a year ago. For the first six months, net income was $168,896,000, or $1.48 per share, down 24% from a year ago. Net sales in the second quarter totaled $2,716,621,000, down 6% from a year ago, and for the six months were $5,216,312,000, down 2%.
“Our mission is to deliver compelling, everyday values for our customers, and executing on this promise requires an unwavering commitment to being a low-cost operator,” Mr. Levine said. “We are taking a number of important steps through our immediate strategic actions to improve our operational efficiency and deliver better financial returns. Family Dollar has ample opportunities for growth. As the environment remains challenging, we are adjusting our growth plans to ensure that we are allocating resources to initiatives with the highest potential for value creation. We are confident that these steps will position the company better, enable us to improve our execution, and deliver higher shareholder returns.”