Back to top

Bear of the Day

Family Dollar Stores, Inc. (FDO - Analyst Report) recently warned that earnings would decline in fiscal 2014 compared with the prior year as the retail environment remained challenging. This Zacks Rank #5 (Strong Sell) is facing tough market conditions as its core customers who shop for value haven't seen the benefits of the economic recovery.

Family Dollar is a discount retailer operating 8,000 stores in rural and urban locations in 46 states.

Lackluster First Quarter

On Jan 9, Family Dollar reported fiscal first quarter 2014 results which missed the Zacks Consensus Estimate by a penny.

Sales rose 3.2% to $2.5 billion from $2.4 billion in the year ago period. This was in line with its previously announced guidance for the quarter.

Consumables led the quarter with an increase of 4.7%, as refrigerated and frozen food, health aids and tobacco boosted the quarter.

Comparable store sales fell 2.8% as customer transactions decreased.

Warned on the Full Year

Family Dollar expects the challenges it faced in the first quarter to impact it the rest of the fiscal year. The economy is not great for its core customer and promotions remain intense.

Comparable store sales for December, which is in the second quarter, fell 3% due to a decline in customer transactions.

For the second quarter, comparable store sales are expected to decline in the low-single-digit range.

For the full year, earnings per share are now forecast to be in the range of $3.25 to $3.55 compared with $3.83 it made in fiscal 2013, which also had one more week.

Analysts didn't waste any time in cutting their estimates.

14 out of 15 estimates were lowered for fiscal 2014 after the announcement. The Zacks Consensus Estimate fell to $3.42 from $3.99. That's a 10% decrease in earnings compared with fiscal 2013.

Shares Slide

Investors have been fleeing the shares for the last few months.

Even still, the shares aren't that cheap. It trades with a forward P/E of 19.8.

The discount retailers, as an industry, are in bad shape. They all have customers that are still struggling. The industry ranks in the bottom 4% of Zacks 265 industries.

But if you MUST own one in your portfolio, check out Dollar General (DG - Analyst Report). It is a Zacks Rank #3 (Hold) and is expected to see double digit earnings growth this year and next.

Want More of Our Best Recommendations?

Zacks' Executive VP, Steve Reitmeister, knows when key trades are about to be triggered and which of our experts has the hottest hand. Then each week he hand-selects the most compelling trades and serves them up to you in a new program called Zacks Confidential.

Learn More>>

Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec.

Please login to Zacks.com or register to post a comment.

New to Zacks?

Start Here

Zacks Investment Research

Close

Are you a new Zacks Member or a visitor to Zacks.com?

Top Zacks Features

My Portfolio Tracker

Is it Time to Sell?

One of the most important steps you can take today is to set up your portfolio tracker on Zacks.com. Once you do, you'll be notified of major events affecting your stocks and/or funds with daily email alerts.

More Zacks Resources

Zacks Rank Home - Evaluate your stocks and use the Zacks Rank to eliminate the losers and keep the winners.

Mutual Fund Rank Home - Evaluate your funds with the Mutual Fund Rank for both your personal and retirement funds.

Stock/Mutual Fund Screening - Find better stocks and mutual funds. The ones most likely to beat the market and provide a positive return.

My Portfolio - Track your Portfolio and find out where your stocks/mutual funds stack up with the Zacks Rank.

Zacks #1 Rank Top Movers for Zacks #1 Rank Top Movers

Company Symbol Price %Chg
GREEN PLAIN… GPRE 36.46 +3.79%
MATRIX SERV… MTRX 30.90 +2.93%
ENZO BIOCHE… ENZ 5.20 +2.77%
GENTIVA HEA… GTIV 15.82 +2.73%
VIPSHOP HOL… VIPS 191.34 +2.23%