UPDATE 1-Family Dollar Q4 profit up, but cautious on 2014
Oct 9 (Reuters) - Family Dollar Stores Inc said on Wednesday it was taking a cautious approach to 2014 as shoppers focus on basics, and posted a better-than-expected quarterly profit as its focus on controlling costs helped offset weaker-than-expected sales
Same-store sales, or sales at stores open at least a year, were flat in the fourth quarter, missing the company's July forecast for an increase of about 2 percent.
Family Dollar said the current first-quarter poses the most difficult sales comparison this year since same-store sales rose 6.6 percent a year earlier. It expects same-store sales to decline in the low-single digits in percentage terms in the quarter.
"At the end of the day, retail stocks are all about sales and I would assume the stock will be a little bit weaker" because of the flat sales and the outlook for negative same-store sales this quarter, said Edward Jones analyst Brian Yarbrough.
Shares of the discount chain fell 3.2 percent to $67.20 in premarket trading.
Family Dollar warned months ago that the economy was taking a toll on shoppers. The environment "was more challenging than expected," Chairman and Chief Executive Howard Levine said in a statement on Wednesday.
Family Dollar's customers continued to face near-term headwinds, and along with an uncertain operating environment, the company was cautious about fiscal 2014, Levine said.
Family Dollar competes against chains such as Dollar General Corp, which is also opening more stores.
Both chains started to sell tobacco products like cigarettes in recent months since many of their customers tend to use tobacco more often than consumers overall. However, those margins are thin and pressure overall profit margins.
Still, the company is continuing to open more stores and said it expects higher profitability as it moves through the fiscal year, which began on Sept. 1.
Family Dollar earned $102.2 million, or 88 cents per share, in the fourth quarter of fiscal 2013 ended Aug. 31, up from $80.9 million, or 69 cents per share, a year earlier.
It reported adjusted earnings per share of 86 cents, which excluded $5 million from a change in accounting for certain vendor allowances. That exceeded analysts' average estimate of 84 cents, according to Thomson Reuters I/B/E/S.
Sales rose 5.8 percent to $2.5 billion, missing analysts' expectations of $2.56 billion.
For fiscal 2014, it forecast a low-single-digit increase in same-store sales and a mid-single-digit increase in total sales.
Family Dollar expects to earn $3.80 to $4.15 per share in fiscal 2014. It earned $3.83 per share in fiscal 2013, which included an extra week that it estimated added 7 cents to profit.
For the first quarter of fiscal 2014, Family Dollar forecast earnings per share of 65 cents to 75 cents, compared with a profit of 69 cents per share a year earlier.
It plans to open about 525 stores and close about 80 stores in fiscal 2014. It opened 500 stores, closed 26 stores and renovated, relocated or expanded 830 stores in fiscal 2013.
It targeted capital expenditures of $550 million to $600 million this year, well below $744.4 million in fiscal 2013.