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Family Dollar Stores Inc. (NYSE:FDO), the operator of the self-service retail discount store chain, is slated to report its third-quarter 2011 financial results on Wednesday, June 29, 2011. The current Zacks Consensus Estimate for the quarter is 94 cents a share and the Zacks Consensus Revenue Estimate is $2,164 million.

Second-Quarter 2011, a Synopsis

Family Dollar’s quarterly earnings of 98 cents per share came in line with the Zacks Consensus Estimate, but jumped 21% from 81 cents earned in the prior-year quarter due to healthy sales witnessed in the Consumable and Seasonal categories.

Family Dollar posted an increase of 8.3% in revenue to $2,263.2 million from the prior-year quarter, reflecting sales growth across Consumables categories (up 10.7%), Seasonal and Electronics (up 8%), Home Products (up 3%), and Apparel and Accessories (up 2.1%). Total revenue also came in line with the Zacks Consensus Estimate.

Management Guided

Management expects third-quarter 2011 earnings between 92 cents and 97 cents, and fiscal 2011 earnings between $3.13 and $3.23. Moreover, Family Dollar, which faces stiff competition from Wal-Mart Stores Inc. (NYSE:WMT) and Dollar General Corporation (NYSE:DG), expects a growth of 8% to 10% in net sales in fiscal 2011.

Third-Quarter 2011 Zacks Consensus

The analysts covered by Zacks, expect Family Dollar to post third-quarter 2011 earnings of 94 cents a share. The current Zacks Consensus Estimate reflects a growth of 22.1% from the prior-year quarter’s earnings. The current Zacks Consensus Estimate for the quarter ranges between 89 cents and 97 cents a share.

Zacks Agreement & Magnitude

The current Zacks Consensus Estimate came down by a penny over the last 30 days, as one out of the 21 analysts covering the stock revised their estimate downwards. In the last 7 days, none of the analysts have revisited their estimates.

Mixed Earnings Surprise History

With respect to earnings surprises, Family Dollar has topped as well missed the Zacks Consensus Estimate over the last four quarters in the range from -4.9% to 9.8%. The average remained at 2.1%. This suggests that Family Dollar has outperformed the Zacks Consensus Estimate by an average of 2.1% in the last four quarters.

Our View

Family Dollar’s strategic initiatives to enhance the merchandising, marketing, and store operations have resulted in persistent growth in both the top and bottom lines. In order to enhance the market share, Family Dollar intends to focus on both consumable and discretionary categories.

Further, the company has effective price and inventory management, cost control, private label offering, expanded operating hours to drive sales and margin trends.

Moreover, the company’s point-of-sale technology (credit card and food stamp acceptance) and store realignment initiatives better positions it to increase traffic, meet the customer’s demand and enrich its in-store shopping experience.

However, the company’s customers remain sensitive to macroeconomic factors including interest rate hikes, increase in fuel and energy costs, credit availability, unemployment levels, and high household debt levels, which may negatively impact their discretionary spending, and in turn, the company’s growth and profitability.

At present, we have a long-term ‘Neutral’ recommendation on the stock. Moreover, Family Dollar holds a Zacks #4 Rank, which translates into a short-term ‘Sell’ rating.