November 2, 2011
Family Dollar Stores (NYSE: FDO ) recently reported strong top- and bottom-line growth in its fourth quarter and for fiscal 2011. The growth in earnings was impressive since it came at a time when the global economy is hardly showing any signs of rebound and the economic environment remains mired in a web of uncertainty.
About that web...
The U.S. economy is going through an uncertain phase and unemployment remains stubbornly high. Consequently, retailing giants such as Sears Holdings (Nasdaq: SHLD ) are feeling the heat of reduced consumer spending and realizing lower revenue and net income. However, deep-discount retailers such as Family Dollar and Dollar General (NYSE: DG ) have performed well as pinched consumers make a rush to the ultra-bargain prices found at these locations.
Family Dollar reported record sales of $8.55 billion in fiscal 2011, an increase of 8.7% compared to the previous year. Net income for the same period also increased 8.5% to $388.4 million. Higher sales were helped by a 5.5% increase in comparable sales for fiscal 2011 and 300 new stores across the U.S.
What's in store?
Family Dollar followed a strategy that seemed to work in its favor. The company's consumables and seasonal and electronics segment witnessed 9.2% higher sales than this time last year. Another factor that helped Family Dollar was its extensive store presence. Family Dollar operates more than 7,000 stores across 44 states and plans to open 450-500 new stores in fiscal 2012, more than a 50% increase over last year's store openings.
If high unemployment does not improve anytime soon, it would likely weigh on consumer spending. For stores such as Family Dollar that rely on discounted offerings to boost sales, this could be an opportunity. Moreover, the addition of new stores should also help boost sales further. This company appears to be worth keeping an eye on.
Fool contributor Abantika Chatterjee does not own shares of any of the companies mentioned in this article. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.