Family Dollar’s Q3 Earnings Beat Estimate (FDO)

Discount retailer, Family Dollar Stores Inc. (NYSE: FDO) said on Wednesday that its fiscal third-quarter net income slipped 3% as lower gross margin offset higher same-store-sales. However, adjusted earnings edged past expectation while revenue was in-line with Street’s estimate.

Shares were gaining about 3.15% in early trading hours as the company’s guidance for the full-fiscal year matched analysts’ forecast.

For the fiscal third quarter, the Matthews, North Carolina-based Company reported a profit of $120.9 million or $1.05  share down from a net income of $124.5 million or $1.06 a share, in the same quarter of last year.

Earlier the Company provided earnings guidance of 98 cents to $1.08 a share while the Street’s consensus estimate was for $1.03 a share.

Revenue climbed 9% to $2.57 billion.

“Our consumables sales remained strong and we continued to gain market share,” said CEO Howard Levine said in a statement during conference call.

Same-store-sales rose 2.9% in the recently concluded quarter.

Same-store sales is a key gauge on retailer’s performance as it includes sales from only those stores that were operational for at least 12 months there by giving accurate information on the sales trend; in other words, erratic sales figures from stores that were opened recently or shuttered in last twelve months are not included.

However, the CEO warned that customers were still experiencing financial headwinds, which was impacting discretionary sales.

Gross margin also narrowed to 34.7% from 35.8%, in the same quarter of last year.

“We are adapting accordingly, and we are focused on stabilizing gross margin, controlling expenses, improving inventory productivity, and driving greater operational efficiencies,” Levine added.

For the fiscal fourth quarter, the discount retailer expects adjusted to be in the range of 82 cents to 87 cents a share, mainly in-line with analysts’ consensus forecast of 85 cents a share.

For the full-fiscal year, Family Dollar anticipates earnings to come in the range of $3.77 to $3.82 a share, which matched analysts’ consensus estimate of $3.77 a share.

Same-store-sales are expected to grow by 3% to 4% for the fiscal 2013.