The Specialist • Mon, Jan. 12
Family Dollar's Woes Show Dollar Store Limitations, Cast Doubt On Merger
- Family Dollar’s rate of net sales growth is significantly lower than its direct competitors’.
- Family Dollar admitted that the number of customer transactions at its stores is falling.
- In contrast to Family Dollar, Dollar Tree and Dollar General have seen significant growth in net sales.
- Sales figures indicate that Family Dollar’s deep discounting strategy is not working.
- Judging by the sales figures, a Dollar Tree/Family Dollar or Dollar General/Family Dollar merger could be a disaster.
- Family Dollar’s revenue expanded slightly due to the opening of stores, but net income and free cash flow declined.
- Family Dollar’s low debt balance sheet serves as a small bright spot.
- Family Dollar’s dividend hasn’t been sustained by free cash flow for three years.
- Q1 2015 earnings were released on January 8.
- Earnings per share and revenue fell short of expectations.
- Comparable-store sales declined 0.4%.
- The stock has reacted by falling over 0.5%.
Update: Family Dollar Delay Buys Dollar General TimeThe Specialist • Dec. 24, 2014
- FDO adjourned its meeting regarding the merger with DLTR or DG.
- The meeting delay raises my confidence a little in FDO and DG.
- The delay is even longer than I expected, which helps both FDO and DG.
Update: The Family Dollar Tug O' War Continues To Dollar General's Benefit
- The vote by FDO shareholders to be acquired by DLTR or DG will be postponed.
- This raises my confidence in both FDO and DG.
- The delay is no surprise.
- Family Dollar has managed to compete successfully with Wal-Mart, Target and Costco in the highly competitive discount retail arena.
- Post-acquisition, Family Dollar's business will compliment Dollar Tree's well.
- Family Dollar is a Dividend Aristocrat with a long history of rewarding shareholders with rising dividends.
- Dollar General and Dollar Tree are engaged in a fight over Family Dollar, but the company still remains a good standalone investment.
- Since Family Dollar has worked on decreasing the prices of its goods, it should benefit from improving consumer confidence.
- Family Dollar is focused on improving productivity in its stores, apart from building a strong network to serve more customers.
Update: Family Dollar Earnings - Still The DarlingMarshall Hargrave • Oct. 11, 2014
- FDO missed 4Q14 consensus earnings.
- This comes as its “core” customer is struggling.
- Regardless, shares remain propped up from the buyout bidding wars.
- FDO’s fourth quarter earnings are out. Food, tobacco, and alcohol were among the strongest.
- This confirms my opinion: sin sells (including junk food) and may help DLTR expand in that area after the pending merger with FDO.
- This trend for dollar stores was detailed in my previous article.
- Shares of Family Dollar didn't do all that much, even after the business reported strong sales growth but profits that missed expectations.
- The fact that shares didn't do much confirms my opinion that the bidding war between Dollar General and Dollar Tree is a bigger factor than earnings.
- In my previous work, I did not anticipate specific results, but I did say that forecasts weren't looking all that great.
Is Family Dollar Poised To Beat The Whisper Number?WhisperNumber • Oct. 9, 2014
- The whisper number is $0.76, one cent behind the analysts' estimate.
- Family Dollar has a 43% positive surprise history (having topped the whisper in 19 of the 44 earnings reports for which we have data).
- The overall average post earnings price move is 'positive' (beat the whisper number and see strength, miss and see strength) when the company reports earnings.
- For the fourth quarter, analysts don't really expect all that much from Family Dollar, with sales expected to inch up and profits set up for a fall.
- While this may be negative news, investors should consider that the bidding war for the retailer implies that results may not be all that volatile for the company's share price.
- If anything, a strong report will likely bolster Dollar General's pursuit of the business, while a weak one would serve to increase the chance of Dollar Tree's bid closing.
Update: Family Dollar Rejects Dollar General Again, Advises Shareholders Against Offer
- Family Dollar recommended that shareholders reject Dollar General’s tender offer and reiterated support for Dollar Tree’s early, and lower, offer.
- In a previous article, I predicted that there would be some back and forth that could push Family Dollar’s share price higher.
- Wednesday’s event confirms that opinion. Expect continued volatility.
- Family Dollar has rejected yet another bid from Dollar General, this one for $80 a share.
- Which is well above Dollar Tree's $74.50 a share offer.
- Family Dollar is playing a game of chicken with investor money, using antitrust as an excuse.
- Nevertheless, Dollar General not buying Family Dollar could be a positive.
- On Sep. 5, Family Dollar announced that it would not be accepting a second bid by Dollar General of $80 per share, but Dollar General reaffirmed its commitment.
- This confirms my opinion that while Dollar General has offered a lot, the business has a lot to gain from buying up Family Dollar; more than Dollar Tree at least.
- In my previous work, I did not anticipate a refusal, but I did indicate that Dollar General may not be able to afford much higher than it's offered already.
Update: Dollar General Raises Bid For Family Dollar, Threatens Hostile Takeover
- Dollar General has raised its bid for Family Dollar, moving to $80 per share, up from its original offer of $78.50 per share and over Dollar Tree’s earlier offer.
- In a previous article, I predicted that Dollar General’s efforts could push Family Dollar’s share price higher.
- Today’s event confirms that opinion and the deal isn’t settled yet.
- Dollar General announced that it would be willing to up the ante on its proposed purchase of Family Dollar, offering $80 per share.
- This news confirms my opinion that Dollar General realizes that it has more to gain from purchasing the company than Dollar Tree does.
- While I could not predict if another buyout offer would, in fact, materialize, I alluded to a high possibility that it could.
Sep. 24, 2014, 8:13 AM
- Retail sales could increase by 4.5% to $986B this holiday season on an improved macroeconomic backdrop, forecasts Deloitte Touche.
- The mark would easily top last year's 2.8% rise.
- Online sales are tipped to rise by 14%.
- Promotional activity across broad retail has been dialed back a touch during the back-to-school season, but is still a risk to margins heading into the crucial shopping period.
- What to watch: This holiday season could be an operational pressure cooker for UPS (NYSE:UPS) and FedEx (NYSE:FDX) with demand expected to be high.
- Related stocks: AAP, AEO, ANF, BBBY, BBY, BJ, CHS, COH, COST, DG, FDO, FL, GPS, JCP, JNY, JWN, KSS, LB, LULU, M, NDN, PIR, RL, TGT, TIF, TJX, UA, URBN, VFC, WMT, ZLC, PERY, SQBG, VNCE, KORS, GIII, KATE, GIL, VRA, ICON, PSMT, AMZN.
- Related ETFs: XLY, XRT, VCR, RTH, RETL, IYK, FXD, FDIS, PMR, UGE, RCD, SZK
Sep. 23, 2014, 8:37 AM
- Paulson & Co. suggested to Family Dollar (NYSE:FDO) at least twice that it explore options to sell itself, reports Bloomberg.
- Though the hedge fund firm is only a passive investor in FDO, John Paulson met personally with the company's management last year to push for action and sent a letter to the board this year.
- The discussions between Paulson & Co. with Family Dollar were disclosed in recent SEC filings.
- SEC Form 14D-9
Sep. 23, 2014, 8:10 AM
- Halloween spending by consumers in the U.S. is expected to rise to $11.3B this year, according to an estimate from ICSC.
- Discount stores (DG, DLTR, FDO) and grocery stores (KR, SVU, SWY, WMT, TGT) are expected to keep a lion's share of the costume spend with shoppers indicating price and the ability to touch costumes as the biggest factors in deciding where to shop.
- Halloween is one of the few calendar events where online has stayed more of a bit player with only an estimated 7% share of purchases.
Sep. 17, 2014, 9:07 AM
- Family Dollar (NYSE:FDO) recommends shareholders pass on the tender offer of Dollar General (NYSE:DG) as it continues to throw its support behind a merger with Dollar Tree (NASDAQ:DLTR) which it sees as more likely to clear regulatory hurdles.
- The company maintains the $80-per-share offer from Dollar General is "highly conditional" and illusory in nature.
Sep. 12, 2014, 2:02 PM
- Wal-Mart (WMT -0.5%) plans to rebrand all of its Express stores to Neighborhood Market in a move that signals a stronger push into grocery.
- The new strategy means that Neighborhood Market stores will range in size from 15K to 40K square feet.
- The company is still testing the smaller Walmart To Go and Walmart On Campus concepts.
- What to watch: Though there's plenty of retail chains which could be impacted by Wal-Mart's NM push, Gilford Securities reasons that dollar stores (FDO, DLTR, DG) and drugstores (RAD, CVS, WAG) top the list.
Sep. 10, 2014, 10:50 AM
- Though management at Family Dollar (FDO -0.2%) is nervous about the regulatory risk of merging with Dollar General (DG), institutional and retail investors are likely to focus more on the higher per-share offer offered by Dollar General than Dollar Tree (DLTR -0.1%), say analysts.
- Ready for action: Dollar General says it has buyout funding commitments from Goldman Sachs and Citigroup in its back pocket. The company's tender offer expires on October 8.
- Still in the mix: Dollar Tree could still match the Dollar General offer, although Edward Jones notes the company lacks the firepower of its discounter rival and is a good bet to stand pat.
- Previous: Wal-Mart the wildcard in battle for Family Dollar.
Sep. 10, 2014, 6:29 AM
- Dollar General (NYSE:DG) initiates a tender offer to acquire all the shares of Family Dollar (NYSE:FDO) at $80 per share.
- The tender is set to expire on October 8 unless extended by the company.
- Dollar General reiterates its position that it's confident the merger will pass regulatory review.
- FDO +0.3% to $78.96 premarket.
Sep. 10, 2014, 1:51 AM
- Following the rejection of its second bid for rival Family Dollar (NYSE:FDO), Dollar General (NYSE:DG) is preparing to go hostile, taking its $9.1B offer directly to shareholders.
- Family Dollar rejected Dollar General's bids citing antitrust risks, and wants DG to assume the entire risk of the deal, such as carrying out any divestiture that antitrust regulators ask for.
- While Dollar General believes it has already offered far more divestitures than is necessary, it has not gone as far as Dollar Tree (NASDAQ:DLTR) which has included a commitment to divest as many stores as necessary to clear antitrust hurdles.
Sep. 9, 2014, 9:56 AM
- Though Family Dollar Stores (FDO -0.1%) seems to have some nervous feet over potential regulatory issues if it were to be acquired by Dollar General (DG -0.4%), there's a case to be made that the deal could fly.
- Research from Kantar Research indicates that in some markets 90% of Family Dollar customers also shop at Wal-Mart (WMT -0.4%).
- The data point bolsters the argument that the Bentonville giant should be a consideration by regulators as they examine the competitive implication of a Dollar General-Family Dollar merger.
- Analysts also think Dollar General could flip the anti-competitive argument around to make the case that a DG-FDO combination would cut into Wal-Mart's dominance in many markets.
Sep. 5, 2014, 8:55 AM
- Citing antitrust concerns, the Family Dollar (NYSE:FDO) board rejects Dollar General's (NYSE:DG) latest bid, which came at a 7.4% premium to Dollar Tree's (NASDAQ:DLTR) buyout price.
- "There is a very real and material risk that the transaction proposed by Dollar General would fail to close, after a lengthy and disruptive review process," says Family Dollar boss Howard Levine.
- Family Dollar and Dollar Tree amend their merger agreement, with Dollar Tree committing to divest as many stores as necessary to receive antitrust clearance. The two also accelerate their expectations for closing the deal to as early as the end of November.
- FDO -0.8%, DG -1.4%, DLTR -1.4% premarket
Sep. 3, 2014, 4:23 PM
Sep. 3, 2014, 2:58 PM
- Carl Icahn has unloaded his holdings in Family Dollar (FDO), according to a report from Reuters.
- Sources indicate the activist investor exited his position in the discounter with a profit of close to $200M.
- What to watch: The sale by Icahn leaves a little bit more breathing room in the boardroom at Family Dollar as it considers competing bids from Dollar Tree and Dollar General.
Sep. 2, 2014, 9:07 AM
- Family Dollar (NYSE:FDO) indicates it will review the updated offer from Dollar General (NYSE:DG) with advisers before it will offer a recommendation to shareholders.
- The Dollar General bid commands a 7.4% premium over what discounter peer Dollar Tree (NASDAQ:DLTR) offered up and includes a commitment to shed up to 1.5K stores.
- Retail analysts think the ample competition in the supercenter/superstore/supermarket space will keep regulators largely at bay as they evaluate the potential combination of the two dollar store chains.
- FDO +0.8% to $80.45, a shade above the $80 bid price from Dollar General, in an indication that some investors are betting yet another offer could come down the road.
Aug. 28, 2014, 8:19 AM| Comment!
Aug. 26, 2014, 1:48 PM
- Retail sales were strong across the sector, according to ICSC.
- Wholesale clubs (COST, PSMT, WMT), dollar stores (DLTR, DG, FDO), and apparel sellers (AAP, AEO, ANF, JCP, JNY, JWN, KSS, LB, M, URBN, PSUN, BKE, WTSL, GPS) all tracked strong for the week.
- Sales for the month are forecast to rise 4% to 5%, compared to last year's 3.6% rise.
Aug. 22, 2014, 11:42 AM
- Family Dollar (FDO +0.4%) is open to taking Dollar General's (DG +0.5%) $9B offer for the company if it agrees to divest enough stores in the combination to appease regulators, sources tell Bloomberg.
- The company doesn't think Dollar General's current proposal to shed 700 stores goes far enough.
- Shares of Dollar Tree (DLTR +0.1%) are on watch as the drama unfolds.
FDO vs. ETF Alternatives
Family Dollar Stores Inc provides consumers with a selection of competitively priced merchandise in convenient neighbourhood stores. Its merchandise assortment includes consumables, home products, apparel accessories, seasonal and electronics.
Other News & PR