With predators at its door, Family Dollar profit falls 33%
CHARLOTTE, N.C. — Family Dollar said last week that profit during its most recent quarter fell by a third, news that’s unlikely to help the discount retailer’s attempts to fend off an activist investor who wants the company sold.
During a conference call with investors Thursday morning, chief executive Howard Levine talked about how the company plans to improve its results, such as closing under-performing stores and selling alcohol at Family Dollar locations.
But he and other executives wouldn’t discuss the billionaire elephant in the room: activist investor Carl Icahn, a longtime corporate brawler who has
demanded that the Matthews, N.C.-based company be put up for sale.
Icahn owns 9.4 percent of Family Dollar’s stock, making him the largest individual shareholder, and he has said he thinks new ownership could spur Family Dollar to catch up with competitors. If he doesn’t get his way, Icahn threatens to take his demands to shareholders and ask them to replace the company’s entire board of directors.
Family Dollar, which has locations in the Northland in Superior, Cloquet, Sandstone, Hayward,
Aurora, Ely and International Falls, has lagged behind its rivals, especially the larger Tennessee-based Dollar General chain, for several quarters. Family Dollar has lower sales-per-square foot, and has struggled with slumping sales and profits.
That trend continued Thursday, as Family Dollar said its third-quarter profit fell 33 percent from the comparable quarter of 2013, to $81 million. Sales increased 3.3 percent, to just under $2.7 billion, driven by strong demand for frozen food and tobacco. But sales excluding stores that recently opened or closed — considered a key measure of a retailer’s health — fell 1.8 percent, and the company said it had fewer customer transactions during the quarter.
Levine said the results weren’t satisfactory, but told investors they will get better.
“We’re still in the early stages of our turnaround,” Levine said. “We’re actively taking steps to improve our results and our trends are beginning to improve.”
He attributed some of the company’s problems to the continuing struggles of the company’s core low-
income customers and an “intense competitive environment” with discount retailers fighting for a share of struggling customers’ dollars.
“The low-end consumer has not benefited in this recovery at all. In fact, I think they’ve slipped back,” said Levine, citing cuts to government benefits, high fuel prices and high unemployment among low-wage workers.
In a bid to increase sales, Family Dollar will expand its frozen and refrigerated food coolers and start stocking beer and wine in its stores next year, Levine said. Family Dollar also will start offering different assortments of goods in its stores by regional cluster, to tailor its offerings more closely to individual markets.
This year Family Dollar has laid off more than 100 people at its headquarters, changed its strategy to lessen the number of costly promotions, cut prices on 1,000 items and shaken up its executive ranks. Former president Mike Bloom departed in January.
Family Dollar also has announced plans to close 370 underperforming stores by the end of its fiscal year. During the company’s third quarter, however, Family Dollar opened 111 stores and closed only three. Family Dollar operates more than 8,200 stores in 46 states.
Last month, Dollar General reported that its quarterly profit rose less than 1 percent, to $222 million, as sales increased 6. 8 percent, to $4. 5 billion.