How far can you stretch a dollar? The answer varies from person to person, but the more people who try, the better business gets for Motley Fool Stock Advisor recommendation Family Dollar (NYSE:FDO). For an update on the nation's economy in miniature, we'll hear from the company on its fiscal Q1 2007 earnings tomorrow morning.
What analysts say:
- Buy, sell, or waffle? Twenty analysts follow Family Dollar. The ratings break down to six buys, 11 holds, and three sells.
- Revenues. On average, analysts expect Family Dollar to report 7% sales growth, to $1.6 billion.
- Earnings. Profits are predicted to outpace that at 12% growth and $0.36 per share.
What management says:
On Nov. 30, Family Dollar reported its sales numbers for the four weeks ending Nov. 25, 2006, and for its fiscal first quarter. The news was basically good all around. Sales edged out analyst estimates for the quarter, rising 7.5% on the back of 1.9% same-store sales growth. Even better, growth accelerated as the quarter progressed, with November's sales up 8% and November's comps up 2.5%. Peering forward into fiscal Q2, the company is looking for more of the same, with comps expected to rise 1% to 3% this month.
And now the bad news: Last month, Family Dollar warned that with its investigation into possible options backdating at the company still ongoing, it would not be filing its 10-K with the SEC by the previous deadline of Nov. 24. And of course, here we are, nearly a month after that due date, and the 10-K still hasn't shown up.
What management does:
More's the pity, because this Fool, for one, would like to see some audited numbers backing up the data shown below. It would be nice to know we can rely on the reports that depict this company growing its rolling gross margins steadily over the last 18 months, and turning its operating and net profitability around over the last few quarters.
|
Margins % |
5/05 |
8/05 |
11/05 |
2/06 |
5/06 |
8/06 |
|---|---|---|---|---|---|---|
|
Gross |
32.9 |
32.9 |
33.0 |
33.0 |
33.0 |
33.1 |
|
Op. |
6.3 |
5.9 |
5.7 |
5.7 |
5.8 |
5.8 |
|
Net |
4.0 |
3.7 |
3.6 |
3.1 |
3.1 |
3.2 |
One Fool says:
Tom Gardner, who recommended Family Dollar for us at Motley Fool Stock Advisor late last year, didn't cite the firm's involvement in the stock-options backdating fiasco as a reason for relegating it to his "third team." In last month's biannual review of all his Stock Advisor picks, however, he did give us plenty of reasons to think twice before investing more in the company. First and foremost, Family Dollar has already given our subscribers a market-trouncing return, rising in price 37% to the S&P's 15% over the last 14 months -- but leaving the stock with little upside remaining.
Although Tom commends the firm for its move into urban retailing, he still thinks the company is having trouble differentiating itself from the numerous other "dollar stores" out there (see a few of them below). Luckily, at the same time as he rained on Family Dollar's parade, Tom gave us 21 better investment ideas to consider for our money. Find out what they are when you accept a free trial of Stock Advisor.
Competitors:
- 99 Cents Only (NYSE:NDN)
- Big Lots (NYSE:BIG)
- Dollar Tree (NASDAQ:DLTR)
- Dollar General (NYSE:DG)
For more on Family Dollar, read:
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Fool contributor Rich Smith does not own shares of any company named above. Dollar Tree is an Inside Value recommendation. The Fool's disclosure policy is a bargain at any price.
