Investors might want to look again at Family Dollar
We said about as many nice things as we could when we covered Family Dollar's full-year results in September. In short, here's a growing company with big plans, an eye for detail, and shareholder-friendly management. A move into more competitive markets, where it battles more directly with Target
Investors have turned on the company, nonetheless. September started well, but since, sales have come in lower than expected -- for the quarter, they were about flat year over year. Apparel sales have been hurt by warmer weather, while seasonal merchandise hasn't moved as well as the company would like. An "everyday low price" strategy means the company doesn't have much room to mark down in such situations.
But if you believe these ills are at least partly driven by the economy, you might take a look while the stock is out of favor. The shares are off some 20% in the last three months, leaving them at about 21 times next year's projected earnings. (Family Dollar is expecting strong second-half bottom-line growth even on slowing sales, citing expectations for better gross margins.)
Twenty-one times earnings may seem slightly rich for 14% profit growth, but a company of this quality is worth tracking when its shares plunge, as they have. Investors seem to be catching on -- the shares reversed direction this week in advance of the earnings report.