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In the wake of a second-quarter profit plunge of more than 30 percent, Matthews, N.C.-based Family Dollar Stores said it will shutter 370 under-performing stores later this year and cut prices on 1,000 products as it embarks on a strategic business review of its operations.
The 8,100 national dollar store chain also said it would curtail new store openings in the next fiscal years to 350 to 400 from its original projected estimate of 525 stores that it planned to open this year alongside “reducing corporate overhead” that will result in job cuts in a bid to save in upwards of $45 million annually in operating costs to deliver stronger shareholder returns.
“Our second quarter results did not meet our expectations,” said Howard R. Levine, Chairman and CEO. “The 2013 holiday season was challenged by a more promotional competitive environment and a more financially constrained consumer. In addition, like many retailers, our second quarter results were significantly impacted by severe winter weather, which resulted in numerous store closings, disrupted merchandise deliveries and higher than expected utility and store maintenance expenses.
“Notwithstanding the macro-economic pressure, competitive environment and severe weather,” Levine continued, “we are not satisfied with our results, and we hold ourselves accountable for improving our performance. To that end, we have initiated an in-depth business review to identify opportunities to strengthen our value proposition, increase operational efficiencies and improve financial performance.”
Highlights of the ongoing business review include:
- A significant investment to lower prices on about 1,000 basic items.
- Reducing its cost structure through the optimization of our workforce.
- Closing approximately 370 underperforming stores.
- Slow new store growth beginning in fiscal 2015 to improve ROI
Family Dollar reported net sales of $2.7 billion for its fiscal Q2 ended March 1, 2014, compared with $2.9 billion from the year-ago period, a 6.1 percent decrease.
Comparable store sales for the quarter decreased 3.8 percent, which according to the company was a result of decreased customer transactions, partially offset by an increase in the average customer transaction value.
Gross profit for Q2 decreased 6.7 percent to $902.3 million, or 33.2 percent of net sales, compared to $967.1 million, or 33.4 percent of net sales, for the year-ago. Additionally, the company posted Q2 net income of $90.9 million compared to $140.1 million for the second quarter of fiscal 2013.