Family Dollar Stores Inc.FDO

Morningstar Rating

Stock Research and Analysis

by Zoe Tan

Faced with a severe economic downturn, consumers have made Family Dollar a preferred shopping destination because of its rock-bottom prices. The chain has capitalized on this trend by increasing consumable merchandise offerings and expanding into urban Read more

Bulls Say

Return on invested capital has historically exceeded the weighted average cost of capital. The resulting free cash flow has allowed the firm to return value to shareholders through share repurchases and dividends.

The firm has been rolling out the "Store of the Future" platform, which features point-of-sale systems that can accept alternative forms of tender, such as food stamps or credit cards.

Low-income consumers typically spend the majority of their income on housing, energy, and food. Proposed economic stimulus packages and a moderation in food and energy prices could serve as potential sales catalysts over the coming months.

Family Dollar has a significant opportunity to capitalize on falling retail real estate costs. More than half of its stores have leases that expire within the next three years, and we believe the firm will be able to negotiate more favorable rent terms or relocate stores to higher-traffic areas. Read more

Bears Say

Economic pressures and rising unemployment rates could cause low-income consumers to cut back on discretionary category purchases, including higher-margin seasonal goods, gifts, and apparel.

The popularity of dollar stores inherently rises during difficult economic times. Family Dollar may struggle to retain new middle-income consumers when economic conditions improve.

We expect continued gross margin pressures as consumable products become a larger part of the sales mix.

An increased focus on urban locations has elevated rent, labor, and utility expenses. Read more

Strategy

Family Dollar has identified a number of core strategic initiatives, including the expansion of its food assortment and acceptance of alternative forms of tender, increased penetration in underserved Read more

Management

Howard Levine has been CEO since 1997 and chairman since 2003. He is the son of Leon Levine, who founded Family Dollar in 1959 and retired from the company in 2003. We would prefer that the chairman and CEO responsibilities be split to provide better Read more

Profile

As of May 2009, Family Dollar Stores operated a chain of more than 6,650 general merchandise discount stores across 44 states. The firm provides low-income consumers a variety Read more

First Name

Last Name

Email Address

Zip Code

Create Password

Verify Password

(6-15 characters; case sensitive)

What is your occupation or job title?

Select...

Your registration indicates agreement to the terms of use.

Daily Dividend Report: FDO, V, TXN, INTC, ED
Watch more