Family Dollar profit misses view, margins pinched

Family Dollar Stores Inc (FDO.N) reported a smaller-than-expected quarterly profit on Thursday as it sold more low-margin consumables and cut prices to remain competitive, and said it expected margins to stay under pressure.

Shares dropped 3 percent to $67.02 in morning trading.

Sales grew 9.6 percent to $2.36 billion in the third quarter through May 26, helped by lower-income shoppers buying items such as milk and food from its small stores, while sales at stores open at least a year were up 5 percent - at the low end of a Family Dollar forecast in March.

But Family Dollar's gross margin fell 0.4 point to 35.8 percent of sales in its third quarter. The hit from price markdowns was offset somewhat by sales of more profitable private brands - a segment of its business that the company hopes to beef up.

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- Posted: 2012-06-28 12:13:55

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