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Friday, October 09, 2009
Chris Jones :: Townhall.com Columnist
This Stock Needs a Consumer Rally
by Chris Jones
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Family Dollar (NYSE: FDO) sells everything a penny-pincher could ask for at rock-bottom prices. But when pushed to the limit, consumers can only spend so much.

Sure, the discount retailer has had a bountiful year. Economic headwinds pressured shoppers to take advantage its low-cost consumables, while the added bonus of relatively low fuel prices compared to last year left those shoppers with a bit more cash in their pockets. But Family Dollar can't expect this success to continue indefinitely. The company continues to implement key initiatives to keep its momentum going.

Family Dollar brought in $1.81 billion in revenue -- up 2.6% from last year's quarter -- as it modified store layouts to be more staple-oriented. However, same-store salesgrew by a meager 1%, after growing 5.6% last year. Although higher sales of low-margin consumable goods pressured margins somewhat, the impact of lower taxes and freight costs, as well as higher price mark-ups, was strong enough to keep gross margins growing and drive double-digit bottom-line growth. Earnings totaled $60.1 million, or $0.43 per share.

Blood from a stone
Some retailers have been enjoying their time in the sun amid this abysmal economic climate.

Company

 Year-over-year Quarterly EPS Growth

Dollar Tree (Nasdaq: DLTR)

50%

Family Dollar

13.2%

Big Lots (NYSE: BIG)

9.4%

BJ's (NYSE: BJ)

4.9%

Wal-Mart (NYSE: WMT)

1.2%

Target (NYSE: TGT) Continued...

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