Family Dollar's 3Q Net Drops 3%, Tops Views

Family Dollar (NYSE:FDO) disclosed a 3% dip in fiscal third-quarter profits on Wednesday, but the discount retailer’s earnings and full-year outlook managed to surpass Wall Street’s expectations.

Shares of Family Dollar enjoyed a 3% bump in premarket trading following the earnings beat.

The company said it earned $120.9 million, or $1.05 a share, last quarter, compared with a profit of $124.5 million, or $1.06 a share, a year earlier. Analysts had been calling for EPS of $1.03 and the company itself had forecast 98 cents to $1.08.

Revenue rose 9% to $2.57 billion, meeting the Street’s views. Same-store sales increased 2.9%, while gross margins dipped to 34.7% from 35.8%.

"Our consumables sales remained strong and we continued to gain market share,” CEO Howard Levine said in a statement. “However, our discretionary sales remained challenged as our customers have been forced to make spending choices between basic needs and wants.”

Looking ahead, Family Dollar sees fiscal fourth-quarter EPS of 82 cents to 87 cents, which is largely in line with estimates from analysts for 85 cents.

For the full year, management forecast EPS of $3.77 to $3.82, which compares favorably with the Street’s view of $3.77. Same-store sales are seen rising 3% to 4% and the company plans to open about 500 new stores, while closing 30 to 50.

“We expect that our customers will continue to face financial headwinds. We are adapting accordingly, and we are focused on stabilizing gross margin, controlling expenses, improving inventory productivity, and driving greater operational efficiencies,” Levine said.

Shares of Matthews, N.C.-based Family Dollar rallied 3.16% to $65.97 in premarket trading on Wednesday. The rally should allow the stock to extend its meager 2013 advance of just 0.85%.