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Family Dollar's Distribution Center in Utah

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Family Dollar Stores Inc. inaugurated its 11th distribution center in St. George, Utah. The facility covering an area of 817,000 square feet will deploy 400 associates to handle the work and will provide services to about 800 stores. Running at its optimum capacity, the center will be capable of shipping 40 million cases in a year.

Last week this self-service retail discount store chain came out with its fourth-quarter fiscal 2013 results. The quarterly earnings of 86 cents a share beat the Zacks Consensus Estimate by a couple of cents, and rose 14.7% from 75 cents delivered in the prior-year quarter. Consumables category was the driving factor behind the sturdy results.

The strength witnessed in the Consumables category came on the back of robust growth across refrigerated and frozen food, health aids and tobacco. Strong focus on consumables helped Family Dollar drive business from budget-constrained consumers.

Family Dollar posted a 5.8% increase in revenue to $2,502.3 million from the prior-year quarter, but fell short of the Zacks Consensus Estimate of $2,556 million.

Moreover, this Matthews, NC-based company said that comparable-store sales remained flat with the traffic count and average consumer transaction value also remained even. Earlier, management had forecasted a 2% rise in comparable-store sales.

Management took a cautious stance while providing guidance for fiscal 2014. Family Dollar now projects earnings in the band of 65 cents to 75 cents a share for the first quarter and between $3.80 and $4.15 per share for fiscal 2014.

Consequently, the Zacks Consensus Estimates have been portraying a downtrend. For the first quarter and fiscal 2014, the Zacks Consensus Estimates dropped 9.1% to 70 cents and 3.4% to $4.01 per share, respectively, in the last 30 days.

The economy is still not completely out of hibernation and consumers will remain cautious on their spending, buying only basic necessities. Consequently, we could witness more competitive pricing and new products to attract shoppers.

A price war would definitely eat away margins, which in turn would affect the company’s results. In order to remain competitive, it would be effective to try out innovative strategies to lure target consumers. Family Dollar currently holds a Zacks Rank #4 (Sell).

Other stocks worth considering in the retail industry, include The TJX Companies, Inc. (TJX - Free Report) , Dollar General Corp. (DG - Free Report) and Ross Stores Inc. (ROST - Free Report) , all of which hold a Zacks Rank #2 (Buy).

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