Family Dollar Q2 sales down 6.1% to $2.7 billion
MATTHEWS, N.C. — Family Dollar Stores on Thursday reported that for the second quarter of fiscal year 2014 ended March 1, net sales totaled $2.7 billion, representing a decline of 6.1%. Earnings per diluted share in the second quarter of fiscal 2014 were $0.80 as compared to $1.21 in the second quarter of fiscal 2013.
Comparable store sales for the 13-week period decreased 3.8% as a result of decreased customer transactions, partially offset by an increase in the average customer transaction value.
Consistent with the National Retail Federation Calendar, the second quarter of fiscal 2014 included 13 weeks as compared to 14 weeks in the second quarter of fiscal 2013. Family Dollar estimates that this extra week contributed approximately $189 million in sales and $0.07 of earnings per diluted share in the second quarter of fiscal 2013. The negative financial impact in the second quarter of fiscal 2014 from the adverse winter weather was at least $0.05 of earnings per diluted share, the company reported.
“Our second quarter results did not meet our expectations,” stated Howard Levine, chairman and CEO. “The 2013 holiday season was challenged by a more promotional competitive environment and a more financially constrained consumer. In addition, like many retailers, our second-quarter results were significantly impacted by severe winter weather, which resulted in numerous store closings, disrupted merchandise deliveries and higher than expected utility and store maintenance expenses,” he said.
“Notwithstanding the macro-economic pressure, competitive environment and severe weather, we are not satisfied with our results, and we hold ourselves accountable for improving our performance,” Levine added. “To that end, we have initiated an in-depth business review to identify opportunities to strengthen our value proposition, increase operational efficiencies and improve financial performance.”
More immediately, Family Dollar has cut prices on about 1,000 basic items and will close approximately 370 underperforming stores. “Our mission is to deliver compelling, everyday values for our customers, and executing on this promise requires an unwavering commitment to being a low-cost operator," Levine said. "We are taking a number of important steps through our immediate strategic actions to improve our operational efficiency and deliver better financial returns.”
"Lastly, we intend to slow new store growth beginning in fiscal 2015 to improve our return on investment. We are confident that these steps will position Family Dollar to deliver stronger returns for our shareholders,” Levine said. Family Dollar now plans to open 350 to 400 new stores in fiscal 2015, down from approximately 525 new stores in fiscal 2014.
Gross profit for the second quarter of fiscal 2014 decreased 6.7% to $902.3 million, or 33.2% of net sales, compared to $967.1 million, or 33.4% of net sales, in the second quarter of fiscal 2013. As a percentage of sales, the impact of stronger sales of lower-margin consumables and higher markdowns was partially offset by higher markups, lower freight expense and lower inventory shrinkage.
In the first half of fiscal 2014, capital expenditures were $219.7 million compared with $409.7 million in the first half of fiscal 2013. In the first half of fiscal 2014, the company spent $76.4 million related to new stores; $54.4 million on its store renovation program; $38.4 million on existing stores; $38.1 million related to corporate and technology investments; and $12.4 million on supply chain investments.
During the first half of fiscal 2014, Family Dollar opened 244 new stores, closed 22 stores and renovated, relocated or expanded 319 stores.
For the third quarter of fiscal 2014, the company expects that comparable store sales will decline in the low-single-digit range and that earnings per diluted share will be between $0.85 and $0.95 per share, excluding approximately $0.13 per share related to restructuring charges. Including the restructuring charges, the company expects earnings per diluted share will be between $0.72 and $0.82.
For the fourth quarter of fiscal 2014, the company expects that comparable store sales will be flat to up slightly and that earnings per diluted share will be between $0.75 and $0.85, excluding approximately $0.37 related to restructuring charges. Including the restructuring charges, the company expects earnings per diluted share will be between $0.38 and $0.48.
For the 52-week year ending August 30, 2014, the company expects that earnings per diluted share will be between $3.05 and $3.25, excluding approximately $0.50 per share related to restructuring charges. Including the restructuring charges, the company expects earnings per diluted share will be between $2.55 and $2.75.
Rite Aid Q4 revenues up 2.2% to $6.6 billion
CAMP HILL, Pa. — In the wake of acquiring Houston-based RediClinic, Rite Aid on Thursday reported revenues of $6.6 billion for the fourth quarter ended March 1, resulting from a 2.2% lift primarily attributed to an increase in pharmacy same-store sales. For the full year, Rite Aid reported $25.5 billion in revenues, up 0.5%.
For the fourth quarter, the company reported net income of $55.4 million or $0.06 per diluted share, and adjusted EBITDA of $356.3 million, or 5.4% of revenues. For the full year, Rite Aid reported net income of $249.4 million or $0.23 per diluted share, and adjusted EBITDA of $1.3 billion, or 5.2% of revenues.
"Thanks to the strong teamwork of our dedicated Rite Aid associates, we delivered strong fourth-quarter and fiscal 2014 results, including new company records for fourth-quarter and full-year adjusted EBITDA," stated Rite Aid chairman and CEO John Standley. "These accomplishments reflect the significant progress we’re making in executing key initiatives and delivering on our promise to actively work with our customers to keep them well," he said. "Our recent acquisitions of Health Dialog and RediClinic, our expanded partnership with McKesson and our continued commitment to investing in our store base have positioned us to transition our strategy from turnaround to growth as we more aggressively pursue opportunities to become a growing retail healthcare company."
Same-store sales for the quarter increased 2.1% over the prior year, consisting of a 3.5% increase in pharmacy sales, partially offset by a 0.7% decrease in front-end sales. Pharmacy sales included an approximate 123 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores decreased 1.8% over the prior year period, with 1.3% of this decrease being driven by a decrease in flu-related prescriptions and flu shots. Prescription sales accounted for 67.5% of total drug store sales, and third party prescription revenue was 97.1% of pharmacy sales.
In the fourth quarter, the company relocated two stores, remodeled 94 stores and expanded three stores, bringing the total number of wellness stores chainwide to 1,215. The company also closed eight stores, resulting in a total store count of 4,587 at the end of the fourth quarter.
Comparable sales for the year increased 0.7% consisting of a 1.2% increase in pharmacy sales, partially offset by a 0.2% decrease in front-end sales. Pharmacy sales included an approximate 232 basis point negative impact from new generic introductions. The number of prescriptions filled in same stores decreased 0.3% over the prior year period. Prescription sales accounted for 67.9% of total drugstore sales, and third party prescription revenue was 97% of pharmacy sales.
For the year, the company relocated 11 stores, acquired one store, remodeled 405 stores, expanded four stores and closed 37 stores.
Rite Aid said it expects sales for fiscal 2015 to be between $26 billion and $26.5 billion with same-store sales expected to range from an increase of 2.5% to an increase of 4.5% over fiscal 2014.
The company’s outlook for fiscal 2015 is based on the anticipated benefits of its wellness remodels, customer loyalty program, new pharmacy sourcing arrangement with McKesson and other initiatives to grow sales and drive operational efficiencies. The company’s outlook also considers planned wage and benefit increases, the introduction of new generics in the second half of fiscal 2015, generic drug price increases and a challenging reimbursement rate environment.
Capital expenditures are expected to be approximately $525 million. This number does not include the purchases of Health Dialog or RediClinic, Rite Aid noted.
Rite Aid acquires RediClinic
CAMP HILL, Pa. — Rite Aid on Thursday announced it has acquired Houston-based RediClinic, one of the nation’s leading operators of retail clinics. RediClinic currently operates 30 clinics in the greater Houston, Austin and San Antonio areas. Through the acquisition, RediClinic will operate as a wholly owned subsidiary of Rite Aid.
Details of the transaction were not disclosed.
“RediClinic is a pioneer and a leader in the retail clinic industry, having provided high-quality, convenient and affordable health care to nearly one and a half million people since opening its first clinic in 2005,” stated Rite Aid chairman and CEO John Standley. “Retail clinics play a critical role in today’s health care delivery system and will play an important role in Rite Aid’s overall health and wellness strategy. We are committed to working with RediClinic to expand its current footprint in Texas and, in the near future, begin to bring its expertise in delivering convenient healthcare and wellness programs to Rite Aid customers in select Rite Aid markets.”
RediClinics are staffed by board certified nurse practitioners and physician assistants, who are trained and licensed to treat common conditions and provide preventive services, in collaboration with local physicians who are affiliated with a leading healthcare system in each market. Patients can be treated for more than 30 common medical conditions and RediClinic’s clinicians are able to write prescriptions for these conditions when appropriate.
Additionally, RediClinics provide a broad range of preventive services, including screenings, medical tests, immunizations and basic physical exams; and the company’s Weigh Forward weight/lifestyle management program is offered at RediClinics and licensed to other providers.
“Through our new relationship with Rite Aid, RediClinic is well positioned for continued growth in Texas and other states,” noted RediClinic CEO Web Golinkin. “Rite Aid enables us to leverage our many years of experience in retail healthcare to the benefit of patients throughout the U.S., and we look forward to working with the Rite Aid team to deliver on our shared mission of helping people live and stay well.”