Family Dollar to close 370 stores, cut jobs and reduce prices after tough Q2
Matthews, N.C. – Family Dollar Stores Inc. plans to close about 370 underperforming stores , cut jobs and lower prices on 1,000 basic items on the heels of a disappointing second quarter. The retailer is also slowing its new store growth beginning in fiscal 2015 to bolster its return on investment. It now anticipates opening 350 to 400 new stores as opposed to approximately 525 stores in 2014.
Family Dollar's net income in the quarter ended March 1, 2014, dropped 35% to $90.9 million from $140.1 million in the year-ago period. Net sales decreased 6.1% to $2.7 billion, from $2.9 billion.
Same-store sales declined 3.8% as a result of decreased customer transactions, partially offset by an increase in the average customer transaction value. Family Dollar cited the extra week in last year's quarter, as well as severe weather, holiday promotions and a challenging consumer environment, as impacting performance.
“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.”
The chief executive went on to say that the company was not satisfied with its performance and would implement a number of initiatives to improve things, including the price cuts, store closings and staff reductions along with re-aligning key organizational functions. The job cuts and store closures are expected to reduce annual operating costs by $40 million to $45 million beginning third quarter of fiscal 2014.
Family Dollar expects to record an estimated $85 million to $95 million restructuring charge in the second half of fiscal 2014 related to the workforce reductions and store closures.
For the third quarter of fiscal 2014, Family Dollar expects that same-store sales will decline in the low-single-digit range and for the fourth quarter of fiscal 2014, the company expects that same-store sales will be flat to up slightly. Family Dollar also expects a low-single digit increase in net sales during the full fiscal year.