The dollar store chain that's the target of a takeover battle saw same-store sales and profit plummet, widely missing analysts forecasts. Fred Katayama reports.
Even lower gas prices couldn't juice up Family Dollar much. The discount store chain enmeshed in a takeover battle saw same-store sales fall in the latest quarter and profit plummet 47 percent, both widely missing analysts forecasts. The retailer said its shift from a promotional strategy to one of everyday low prices cut into its bottom line, as did the increase in sales of lower-margin goods like food and tobacco. Stockpiles grew. Noting that drop in comparable store sales, Cleveland Research senior analyst Scott Bender said, "This is particularly concerning as the macro environment was starting to become more favorable later in the quarter." The weak results come just weeks after Family Dollar put off a shareholder vote to approve its merger with discounter Dollar Tree. That gives Dollar General more time to work with regulators and convince Family Dollar's shareholders to consider its unsolicited all-cash bid. Family Dollar has spurned that higher bid to stick with its vow to marry Dollar Tree, contending that a merger with Dollar General would fail to get regulators' blessing over antitrust concerns. Family Dollar didn't issue an outlook. But it said it's off to a "solid start" in the current quarter, with more customers visiting its stores and fewer markdowns. Investors weren't impressed. Family Dollar's shares, which gained 20 percent last year amid the takeover battle, lost ground in early trading.