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Family Dollar reports record Q4 earnings
04
Oct '08
Family Dollar Stores Inc reported earnings results for the fourth quarter and full year of fiscal 2008 and provided fiscal 2009 guidance.

“As expected, fourth quarter sales benefited from the effect of the government stimulus checks distributed this summer. Strong sales of consumables and effective management of inventory risk, combined with disciplined expense control resulted in robust earnings growth,” said Howard R. Levine, Chairman and Chief Executive Officer. “After a challenging first half, these results reflect how quickly our team has adapted to the changing macro environment. The investments we made to drive revenue growth delivered strong results, and our Associates did a great job managing expenses and inventory risk in this uncertain environment.”

Net income per diluted share in the fourth quarter of fiscal 2008 increased 46.2% to $0.38 compared with $0.26 per diluted share in the fourth quarter of fiscal 2007. Net income for the fourth quarter of fiscal 2008 increased 40.7% to $53.2 million, compared with $37.8 million for the fourth quarter of fiscal 2007.

Fourth Quarter Results:
As previously reported, net sales for the fourth quarter of fiscal 2008 were $1.766 billion, or 8.2% above sales of $1.632 billion for the fourth quarter of fiscal 2007. Sales in comparable stores increased 5.6%. The increase in comparable store sales was a result of an increase in the average customer transaction value and higher customer traffic, as measured by the number of register transactions. During the fourth quarter of fiscal 2008, the Company opened 40 stores and closed 14 stores.

Gross profit, as a percentage of sales, was 32.9% in the fourth quarter of fiscal 2008 compared to 33.1% in the fourth quarter of fiscal 2007. The decline in gross profit, as a percentage of sales, during the quarter was a result of the effect of stronger sales of lower-margin consumable merchandise and higher freight expense, which was partially offset by lower merchandise markdowns and lower store inventory shrinkage.

Selling, general and administrative (“SG&A”) expenses increased 4.4% to $499.2 million compared to $478.3 million in the fourth quarter of fiscal 2007. As a percentage of sales, SG&A expenses were 28.3% in the fourth quarter of fiscal 2008 compared with 29.3% in the fourth quarter of fiscal 2007. Most expenses were leveraged during the quarter as a result of the strong comparable store sales increase and continued expense management.

Operating profit, as a percentage of sales, was 4.6% compared with 3.8% in the fourth quarter of fiscal 2007. Lower SG&A expense, as a percentage of sales, more than offset lower gross profit, as a percentage of sales.

In the fourth quarter of fiscal 2008, the Company's tax rate was approximately 34.8% compared with 36.7% in the fourth quarter of fiscal 2007. The decrease in the tax rate was primarily the result of the effect of changes in reserves for income tax contingencies.

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