SA News • Today, 6:50 AM
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.
Today, 6:50 AM
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, 8:20 AM
- Dollar General (NYSE:DG) says discussions with the FTC over the company's offer to acquire Family Dollar (NYSE:FDO) are ongoing.
- The company has already has detailed talks with potential buyers for many of the Family Dollar stores which would need to be offloaded if a deal was struck.
- Still, the discounter faces an uphill battle in the attempt to swallow up its sector rival.
- Proxy firms Glass Lewis and ISS have both recommended that Family Dollar shareholders vote to merge with Dollar Tree (NASDAQ:DLTR).
- FDO closed at $76.30 yesterday vs. the DLTR offer price of $74.50 and DG bid of $80.
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.
Mon, Jan. 12, 6:55 AM
- Family Dollar (NYSE:FDO) issues an open letter to shareholders in which it recommends they vote to approve a merger with Dollar Tree (NASDAQ:DLTR).
- The company says economic analysis by the FTC on the Dollar Tree combination leads to a count of problematic stores of 310, compared to estimated 3K-4K which would likely be needed to be divested under the Dollar General (NYSE:DG) merger proposal.
- A special meeting of Family Dollar shareholders is set for January 25 to vote on the DLTR offer.
- Full letter
Fri, Jan. 9, 8:35 AM
- The House passed a bill to redefine a full-time worker under the Affordable Care Act to 40 hours a week from 30 hours.
- The legislation could impact millions of workers as companies adjust hours and employee policies around the issue.
- The measure was passed by a vote total of 252-172.
- Senate Majority Leader Mitch McConnell has indicated the bill will see a vote in his chamber.
- The White House has threatened to veto the bill on its view it will reduce the number of workers covered by healthcare.
- Most industry groups within the restaurant and food industry have issued support for the legislation.
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Thu, Jan. 8, 8:18 PM
- Holiday retail sales rose 4.6% vs. expectations for a 3.8% lift, according to a read from ShopperTrak. The growth rate is the highest since 2005 for the period.
- The rush of positive reports from retailers on holiday sales comes off of some beaten-down expectations, notes Chain Store Age.
- Concerns on mall traffic, a West Coast port slowdown, and a frenzied level of promotions drove consensus estimates lower before some macroeconomic factors improved and $2 gas entered the scene.
- A cross-section of retailers that surprised on the upside includes Barnes & Noble, Pier 1 Imports, Walgreens, Urban Outfitters, and Sonic.
- What to watch: Costco (NASDAQ:COST) put up a 5% comp for December, putting some pressure on Wal-Mart (NYSE:WMT) and Target (NYSE:TGT) to show signs of late-quarter strength. Signs of weakness at dollar stores (DG, DLTR, FDO, FIVE) and electronics chains (HGG, CONN, BBY) are a concern. Retailers seen as on-trend for the holiday season include Foot Locker (NYSE:FL), Lululemon (NASDAQ:LULU), and Williams-Sonoma (NYSE:WSM).
- Related ETFs: XLY, XRT, VCR, RTH, RETL, IYK, FXD, IYC, FDIS, SCC, UCC, PMR, UGE, RCD, SZK
Thu, Jan. 8, 7:21 AM
- Family Dollar (NYSE:FDO) reports comparable-store sales fell 0.4% in FQ1 as the retailer shifted to an "everyday" pricing strategy.
- Gross profit rate -90 bps to 33.4% on a higher mix of food and tobacco sales impacted results.
- Operating profit -170 bps to 3.1%.
- SG&A expense rate +80 bps to 30.3%.
- Merchandise inventory +4.1% to $1.71B.
- Capex spending down 8% on fewer store openings.
- FDO -1.0% premarket.
Thu, Jan. 8, 7:21 AM
Thu, Jan. 8, 7:03 AM| Comment!
Wed, Jan. 7, 5:30 PM
Fri, Jan. 2, 8:51 AM| Comment!
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
Dec. 19, 2014, 9:57 AM
- Dollar General (DG -1.1%) announces it remains "actively engaged" with the FTC on the amount of store divestitures needed to see the regulator clear a Family Dollar (FDO -0.4%) acquisition.
- The company says its brief statement will be the last update on the issue prior to the scheduled Family Dollar shareholder meeting on December 23.
- What to watch: Dollar General is one of the retail names picked by some analysts to see a sales boost tied to lower gas prices in the U.S. The company is already running up against a soft storm-impacted comp from last winter.
Dec. 11, 2014, 5:52 PM
- In a new 13D, Elliott Management says it now owns a 7.7M-share (6.8%) stake in Family Dollar (NYSE:FDO).
- Two months ago, the activist disclosed a 4.9% stake in FDO, and called on the discount retailer to provide Dollar General with "an even playing field in its continuing efforts to acquire the Company." Last week, Dollar Tree said it expects its pending acquisition of FDO to close by early February.
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.
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