(FDO) Family Dollar Stores – Bull of the Day

We upgrade our recommendation on Family Dollar Stores (FDO) to Outperform on the back of strategic initiatives undertaken to improve merchandising and store operations that have inspired top- and bottom-line growth. The company’s point-of-sale technology, store realignment and merchandise initiatives are driving traffic. These helped the company to post healthy fourth-quarter 2012 results.

The quarterly earnings of $0.75 per share jumped 13.6% from the prior-year quarter, whereas net sales climbed 10.8% with comparable-store sales rising 5.4% driven by healthy performance at Consumables, and Seasonal and Electronics categories. For fiscal 2013, management now expects a growth of 13% to 15% in net sales and 12.6% to 20.9% in earnings per share.

Management’s 3-to-5 year growth target includes double-digit growth in the bottom-line and store count expansion at a rate of 5% to 7%. Further, the company remains committed towards better price management, cost containment, effective inventory management and private label offering that should drive sales and margin trends.

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