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MATTHEWS, N.C. -- National discount store chain Family Dollar Stores, Inc. here said yesterday that its growth initiatives are paying off, as the retailer reported a better-than expected increase in earnings for the second quarter.
Net income for the quarter ended Feb. 25 was $54.5 million, or 35 cents a share, compared with net income of $80.1 million in fiscal 2005. Included in results for the second quarter of fiscal 2006 is a litigation charge of $45.0 million that came after an Alabama court ruled earlier this month that Family Dollar's store managers were entitled to overtime pay. The company is appealing the verdict. Excluding this litigation charge, non-GAAP earnings were 53 cents a share.
As previously reported, sales for the second quarter of fiscal 2006 were approximately $1.736 billion, or 9.4 percent above sales for the second quarter of fiscal 2005. Sales in comparable stores increased approximately 3.2 percent.
"The initiatives that we launched last year are now providing a solid foundation supporting comparable store sales growth," said chairman and c.e.o. Howard R. Levine in a statement. "This, along with better than planned gross margin and expense control drove above plan operating results for the second quarter, excluding the legal charge."
Family Dollar said it expects its cooler program, Urban Initiative, and Treasure Hunt merchandise strategy to drive mid-single digit comparable sales growth in the second half of fiscal 2006.
Starting last year, Family Dollar began installing refrigerated coolers for perishable food in its stores, a move it said would increase the frequency of customer shopping trips and average transaction size. It has said it expects to have coolers in about 3,500 stores by the end of August.
The so-called "urban initiative," meanwhile, is aimed at boosting sales and lowering shrinkage in its urban stores.
During the second quarter, Family Dollar opened 87 new stores and closed 37 stores. For the full year, the retailer plans to open approximately 400 stores and close approximately 65 stores. The company operates more than 6,000 stores.