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.
Thu, Jan. 22, 9:38 AM
- Shareholders with Family Dollar (NYSE:FDO) have approved the merger offer from Dollar Tree (DLTR +1.8%) as expected.
- 74% of shareholders approved the merger of the discounters.
- FDO trades at $76.20 vs. the buyout price of $74.50.
- Shares of Dollar General (NYSE:DG) are taking the news well, up 2.4% in early trading.
Thu, Jan. 22, 2:18 AM
- Family Dollar (NYSE:FDO) shareholders are expected to vote today in favor of a pending $8.5B merger with Dollar Tree (NASDAQ:DLTR) despite a higher $9.1B offer from Dollar General (NYSE:DG) still on the table, Reuters reports.
- Family Dollar and two influential proxy firms are pushing for the deal with Dollar Tree, which said it would divest as many outlets as required to get antitrust approval.
- Dollar General has said it would only shed up to 1,500 stores.
- Previously: Proxy firms back Dollar Tree's bid for Family Dollar (Jan. 15 2015)
- Previously: Family Dollar sticks with Dollar Tree recommendation (Jan. 12 2015)
Thu, Jan. 15, 3:13 AM
- Changing their previous stance, two influential proxy firms, Institutional Shareholder Services and Glass Lewis & Co, have advised Family Dollar (NYSE:FDO) shareholders to vote for the retailer's acquisition by Dollar Tree (NASDAQ:DLTR), saying it was more likely to close as it faced fewer antitrust hurdles.
- Previously, Dollar Tree had said it would divest as many outlets as required to get antitrust approval for the deal, while Dollar General (NYSE:DG) stuck to its offer to shed up to 1,500 stores.
Dec. 23, 2014, 10:31 AM
- The Family Dollar (FDO +0.2%) shareholder meeting has been adjourned to January 22, according to the Charlotte Observer.
- The delay was expected with the FTC yet to finalize its ruling on the amount of store closings it requires in a Dollar General (DG +1%) acquisition of Family Dollar.
- Recap: Dollar General is in with a $9.1B offer for FDO to top the $8.5B Dollar Tree (DLTR +0.9%) bid which is preferred by the target's board
Nov. 19, 2014, 5:13 AM
- Dollar General (NYSE:DG) may have to divest more than 4,000 stores, more than double the 1,500 stores it said it was willing to sell, if it wants to gain regulatory approval to buy Family Dollar (NYSE:FDO), reports The New York Post.
- Getting the FTC to change its mind could take months, but rival Dollar Tree (NASDAQ:DLTR) wants a vote on its proposed Family Dollar merger by Dec. 31.
- Without the time to explain its case to the FTC, Dollar General could be forced to either raise its bid or live with the added number of divestitures.
- DG -1.8% premarket
Oct. 10, 2014, 5:31 PM
- The FTC has issued a second request for additional info to Dollar General (NYSE:DG) regarding its $9.1B buyout offer for Family Dollar (NYSE:FDO). State AGs have already been probing the bid on antitrust grounds.
- DG -1.2% AH. For now, Family Dollar continues supporting Dollar Tree's (NASDAQ:DLTR) $8.5B offer.
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. 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. 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. 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. 21, 2014, 8:14 AM
- Shares of Family Dollar (NYSE:FDO) are lower in early trading after the company confirms reports that is has rejected a $78.50-per-share offer from Dollar General.
- The company says it has antitrust concerns about the combination.
- The board has reaffirmed that it supports the company merging with Dollar Tree (NASDAQ:DLTR).
- Premarket: Dollar Tree -1.8%, Family Dollar -0.5%, Dollar General (NYSE:DG) -1.1%.
Aug. 21, 2014, 4:35 AM
- Dollar General (NYSE:DG) states that Family Dollar (NYSE:FDO) CEO Howard Levine, ignored multiple requests to pursue a merger even prior to Dollar Tree's (NASDAQ:DLTR) $74.50-a-share offer.
- Rick Dreiling, CEO of Dollar General claims that Levine shrugged off the requests out of fear he would be forced to step down as CEO.
- Earlier this week, Family Dollar's board announced that it would review Dollar General's $78.50-a-share offer, but continued to recommend shareholders vote for its $74.50-a-share deal with Dollar Tree.
Aug. 18, 2014, 8:34 AM
- Dollar General (NYSE:DG) is a clear favorite in the race for Family Dollar (NYSE:FDO), according to retail analysts.
- The company forecasts annual run-rate synergies almost twice the amount Dollar Tree (NASDAQ:DLTR) forecast on top of the extra $4 per share it's willing to pony up.
- FDO +4.85% to $79.75.
Aug. 18, 2014, 7:06 AM
- A combination of Dollar General (NYSE:DG) and Family Dollar (NYSE:FDO) would create a discounting giant with close to 20K stores and sales of over $28B per year.
- The retailers estimate the merger would create synergies of $550M-$600M annually three years after the deal closes.
- It's also estimated that the new company would return to investment grade approximately three years after closing.
- Premarket: DG +10.4% to $63.45, Dollar Tree (NASDAQ:DLTR) -1.4% to $54.85, FDO still to open.
Aug. 18, 2014, 6:59 AM
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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.
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