Family Dollar outlook tops view, plans more stores

By Reuters
Posted Sep. 29, 2010 at 11:43 a.m.

Family Dollar Stores Inc. forecast profit for the current fiscal year that would beat most analyst estimates and said it will speed up the pace of new store openings, sending its shares up 2.5 percent. The retailer, which prices most of its goods under $10, has attracted consumers struggling in a weak economy. It expects to reap the sales benefit of longer store hours, introduced earlier this year, and an overhaul to give more room to fast-moving items like food.

The company also posted a fourth-quarter profit Wednesday that beat analysts’ estimates and said it had authorized a new $750 million share repurchase plan. It said the repurchases would lower its cost of capital.

The move comes as Family Dollar faces pressure from activist investor Nelson Peltz to improve shareholder value. Peltz’s Trian fund group has a 6.6 percent stake in the company.

The accelerated store expansion, share repurchase plan and a forecast of a 5 percent to 7 percent increase in same-store sales for the current quarter were welcomed by analysts, with one saying the moves can help the company compete better with rival Dollar General Corp. Dollar General shares fell 1.5 percent.

“All in, Family Dollar continues to be our dollar store of choice, given the significant opportunity the company has to narrow the productivity gap that exists with Dollar General,” said JPMorgan retail analyst Charles Grom.

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