After a hiatus of a few days since receiving shareholders’ nod in favor of a merger with Dollar Tree, Inc. (DLTR), Family Dollar Stores Inc. (FDO) highlighted in a filing that comparable-store sales increased 1.2% in Dec 2014, gaining from fewer markdowns. Consolidated sales rose 3.6% year over year to $1.21 billion.
Gross profit during the month advanced 5.4% to $422.5 million, whereas gross margin expanded approximately 59 basis points to 34.9%. During the period, Family Dollar opened 34 new outlets. The company also renovated, expanded or relocated 30 stores, and shuttered 15 outlets.
Family Dollar Stores has been in troubled waters for some time now. It was trying all means to convince its shareholders to favor the Dollar Tree transaction. At a special meeting held on Jan 22, 2015, the company unveiled that an overwhelming majority of shareholders – 84 million out of 114 million – have decided to stick with Dollar Tree as it has higher chances of passing the antitrust concerns.
Prima facie, Dollar General Corporation’s (DG) $9.1 billion offer was undoubtedly better than Dollar Tree’s $8.5 billion bid. However, this deal looked to have fewer chances of obtaining regulatory approval.
The giant that will arise once the deal between Family Dollar and Dollar Tree is closed will be strong enough to single-handedly counter competition from retail bellwethers such as Wal-Mart Stores Inc. (WMT) in the dollar-discount store segment.
The combined chain, with the ability of generating sales of over $18 billion, will be in a better position to reach out to more value-seeking consumers through its vast network of more than 13,000 stores spanning 48 states and five Canadian Provinces. The buyout, which will help Dollar Tree to emerge as a leading discount retailer in North America, will also assist in providing customers with products at a fixed price ($1 or less) under its banner and multi-price point under Family Dollar.
Family Dollar Stores currently carries a Zacks Rank #3 (Hold).
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