Family Dollar posted a smaller quarterly profit Wednesday and said it expects customers to remain under financial pressure and hold back on purchases that aren't absolutely necessary.
Sales rose 9 percent to $2.57 billion, while sales at stores open at least a year, or same-store sales, rose 2.9 percent in the quarter ended June 1. The discount chain expects same-store sales to rise 2 percent this quarter.
Family Dollar Stores (FDO) earned $120.9 million, or $1.05 a share, down from $124.5 million, or $1.06 a share. That was two cents better than expected by Wall Street analysts, according to Thomson Reuters I/B/E/S.
The discount chain's gross profit margin fell 1.1 percentage points to 34.7 percent of sales, as shoppers gravitated toward buying everyday products such as food and cigarettes, which have lower profit margins than items like short-sleeved shirts and tank tops.
"Our customers have been forced to make spending choices between basic needs and wants," Chief Executive Howard Levine said in a statement.
Family Dollar's gross profit margin was also hurt by markdowns. But inventory per store was down 1 percent compared to a year earlier, easing Wall Street fears that the 7,800-store chain had too much merchandise on hand on which it might have cut prices.
Shares were up 2 percent to $65.20 in premarket trading.
In April, the discount chain cut its annual profit forecast for the second time due to expectations its customers would hold off on discretionary spending.
On Tuesday, Family Dollar said it now expects a profit of $3.77 to $3.82 a share for the fiscal year ending this quarter, a range whose midpoint is below that of its earlier forecast of $3.73 to $3.93 a share.
Stores That Price Match
Family Dollar Profit Shrinks as Consumers Face Tough Choices
Shopping site Cheapism.com recently completed a survey of eight major retailers' price-match policies. After considering the written policies and assessing whether front-line employees actually complied with the policies as written, the site divided the retailers into three tiers of consumer friendliness.
Here's how the retailers stacked up. We've included post-purchase price-adjustment windows, notable exclusions and a few notes on how well employees understood the policy and complied with price-match requests.
The policy allows you to show the competitor's price on an original print ad or on your mobile phone.
Interestingly, while it will price-match Target.com prices, it will not price-match other Target stores in the area. Another downside is that you only get 7 days after your purchase to get a price adjustment.
Despite not matching its own website's pricing, J.C. Penney's price-match policy made the top tier in Cheapism's ranking. It helps that there's no fixed time span for price adjustments -- the policy says that as long as the competitor's ad is still valid, the store will be able to do a price adjustment.
Only physical retailers in the area are included in the policy, though a lot of discretion is given to store managers. Cheapism editor Kara Reinhardt tells me that a reporter visited the same store location on two occasions and asked them to match a price from another department store's website; one manager agreed to do so, while the second turned down the request.
Still, she says that for the most part, J.C. Penney managers were "really helpful and flexible" when it came to price-matching requests.
While Lowe's doesn't match online-only competitors, they will price-match local competitors and their websites. And you have a very generous 30-day window to get a price adjustment after your purchase.
But here's the most generous part: If you've got proof of a lower price, you'll get the competitor's price plus an additional 10% off.
The only other retailer that offered an extra 10% off was Lowe's biggest competitor, Home Depot. And like Lowe's, it requires a current ad, and will match local competitors and their websites.
Still, it falls slightly short of Lowe's when it comes to post-purchase price adjustments -- instead of the 30 days you get at Lowe's, Cheapism found that price adjustments are left to the manager's discretion.
With that said, sometimes employee discretion can work in the customer's favor -- Consumerist found last year that Home Depot associates are empowered to take $50 off any purchase to make a sale, and managers can discount a lot more than that.
Best Buy followed Target's lead in offering to price-match Amazon earlier this year. But as we pointed out at the time, the policy falls short in one very important way: Best Buy doesn't do price adjustments if a competitor lowers its price after the fact. Cheapism adds a little more context, noting that it will make a price adjustment 15 days after purchase -- but only if it's Best Buy lowering its price.
Other than that, it's a generous policy -- it boasts a long list of online competitors beyond Amazon that it will price-match, including NewEgg, TigerDirect and Apple.com. And Reinhardt says that Best Buy employees "were really well-versed in the policy at both locations" that a reporter visited.
Walmart probably talks about its price-match policy more than anyone, running ads touting the fact that they'll match competitors' prices without even seeing the ad.
But apparently the reality is a bit different: Reinhardt said that a Cheapism reporter visited five different Walmart locations, and that employees at four of those locations said that they needed to see the competitor's ad.
It also restricts itself to local competitors and won't price-match its own site, though site-to-store delivery is free. And while the price adjustment window for store purchases is unclear, it's just 7 days for Walmart.com.
In some ways, Sears is more generous than Walmart: Its got a 14-day price-adjustment policy, and it will match the prices of local competitors' websites.
But online matching only applies if the local competitor matches its own site's prices. And it also loses points for calculating the online price after shipping and handling have been accounted for.
Cheapism also cites customers who have complained online that employees at their local Sears gave them a hard time about price-matching and adjustments.
Kohl's will only match local competitors, refusing to match any online prices. That includes its own website, but unlike J.C. Penney and Walmart, it doesn't offer the option of ordering online and having it delivered to the store for free.
Price adjustments are similarly hard to come by: Like Best Buy, it will only grant you a price adjustment if it changes its own price within 14 days. Cheapism also notes that employees seem unclear on the retailer's policy.