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Family Dollar drives profit in Q4

Driven by continued rapid expansion and a double-digit gain in sales, fourth-quarter profits at Family Dollar Stores Inc., a neighborhood small-store chain, jumped up by 13.8 percent, to $47.7 million from $41.9 million last year.

Sales increased by 14.2 percent, to $1.2 billion from $1.1 billion last year, lifted by stronger same-store sales and the rollout of new units. Same-store sales advanced by 4.6 percent, with hard lines improving by 5.1 percent, outpacing a 2.8 percent gain in softlines sales.

The retailer said the customer count, measured by the number of register transactions in existing stores, increased by about 3.9 percent, while the average transaction increased by 0.5 percent, to $8.66.

Fueling continued double-digit growth during the fourth fiscal quarter, which ended Aug. 30, Family Dollar opened 190 new stores while closing two. For the entire fiscal year, the chain opened 475 stores and closed 64. By the end of the year, the company operated 5,027 stores in 43 states.

Average gross margin expanded by 60 basis points, or six-tenths of a percentage point, during the fourth quarter, to 32.9 percent from 32.3 percent a year ago, helped by wider margins on apparel and other seasonal goods. But offsetting stronger margins were higher costs, which moved up by 70 basis points, or seven-tenths of a percentage point, to 26.7 percent from 26.0 percent last year. Driving expenses higher, the retailer said, was above-plan workers' compensation costs.

Polishing up its crystal ball, Family Dollar forecast that same-store sales in the first fiscal quarter, October through December, will rise by 4 percent to 6 percent. That, in combination with sales generated by new stores, should help propel earnings per share up by 14 percent to 16 percent during the final calendar quarter of the year.

Family Dollar Stores Inc.

Qtr. 8/30 (x000) 2003 2002 % chg
Sales 1,208,474 1,058,272 14.2
Oper. income (EBIT) 75,082 65,975 13.8
Net income 47,677 41,894 13.8
Per share (diluted) 0.28 0.24 16.7
Average gross margin 32.9% 32.3%
SG&A expenses 26.7% 26.0%
12 months 2003 2002 % chg
Sales 4,750,171 4,162,652 14.1
Oper. income (EBIT) 389,725 341,621 14.1
Net income 247,475 216,929 14.1
Per share (diluted) 1.43 1.25 14.4
Average gross margin 33.8% 33.5%
SG&A expenses 25.6% 25.3%


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