According to the Associated Press, in a recent turnaround, William Ackman evolved as the largest shareholder of Family Dollars Stores Inc. (FDO), surpassing Nelson Peltz’s stake.
Ackman and his Pershing Square Capital Management LP, at present owns approximately 8.9% stake in the self-service retail discount store chains. Prior to it, Pershing Square had around 4.7% stake in the company.
Ackman’s recent disclosure takes him above Nelson Peltz's Trian Fund Management LP, who earlier had the largest stake of approximately 6.5% in Family Dollar.
Prior to it, Family Dollar refused a voluntary offer from Trian Group for the buyout as it felt that the bid significantly underrated the company. Trian Group, the largest shareholder of the company at that time had offered $55.0 to $60.0 per share or approximately $7.0 billion to the company.
Family Dollar Stores, which operates a chain of retail discount stores in the United States, faces stiff competition from Wal-Mart Stores Inc. (WMT) and Dollar General Corporation (DG). It offers general merchandise in four categories: consumables, home products, apparel and accessories, and seasonal and electronics. The company presently operates more than 6,800 stores in 44 states.
Family Dollar’s strategic initiatives to enhance the merchandising, marketing, and store operations have resulted in persistent growth in both the top and bottom lines. In order to enhance the market share, Family Dollar intends to focus on both consumable and discretionary categories
Further, the company has effective price and inventory management, cost control, private label offering, expanded operating hours to drive sales and margin trends.
Moreover, the company’s point-of-sale technology (credit card and food stamp acceptance) and store realignment initiatives better positions it to increase traffic, meet the customer’s demand and enrich its in-store shopping experience.
However, the company’s customers remain sensitive to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels, and high household debt levels, which may negatively impact their discretionary spending, and in turn, the company’s growth and profitability.
At present, we have a long-term ‘Neutral’ recommendation on the stock. Moreover, Family Dollar holds a Zacks #3 Rank, which translates into a short-term ‘Hold’ rating.
DOLLAR GENERAL (DG): Free Stock Analysis Report
FAMILY DOLLAR (FDO): Free Stock Analysis Report
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