Family Dollar Stores Inc.'s third-quarter profit fell as the
company reported higher costs ahead of its planned merger with
Dollar Tree Inc.
The discount retailer, which hasn't offered financial
projections citing the pending merger, has agreed to sell 330
stores to new York private-equity firm Sycamore Partners to address
regulatory concerns. Final approval by the Federal Trade Commission
is pending.
Family Dollar hasn't paid cash dividends during the second and
third quarters under the terms of the Dollar Tree merger
agreement.
The combined company, which would bring together the No. 2 and
No. 3 companies in the dollar-store category, would create the
largest company in the sector with more than 13,000 stores that
would continue to operate under both brands.
Dollar Tree sells products for $1 or less and focuses on
suburban markets, while Family Dollar sells more branded consumer
products like detergent and groceries and focuses on urban and
rural markets.
Overall, Family Dollar reported a profit of $79.9 million, or 70
cents a share, for the 13 weeks ended May 30, down from $81.1
million, or 71 cents a share, a year earlier. Excluding
restructuring- and merger-related charges, the company's profit was
74 cents a share, compared with 85 cents a year earlier.
Net sales rose 2.60% to $2.73 billion.
Analysts surveyed by Thomson Reuters projected 82 cents a share
on slightly higher net sales than the company reported.
Sales at stores open for at least 13 months rose 0.7% as the
company reported higher customer transactions though the average
transaction value fell.
Gross margin improved to 34.6% from 34.3% a year earlier.
Inventory, meanwhile, rose 2.5% to $1.63 billion.
Shares, largely flat in late trading, closed Wednesday at
$79.18, down slightly for the year.
Write to Maria Armental at maria.armental@wsj.com
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