Shares of retailer Family Dollar Stores Inc. (NYSE:FDO) have been taking a hit in early trading as the company slashed its full-year earnings outlook amid tumbling market conditions.The retailer was able to post better-than-expected earnings numbers but this was not enough to reassure investors who pushed the stock down over 1%.
Family Dollar Stores announced that its second quarter profit had dropped 30% to $63.3 million, down from $90.5 million reported in the same period a year ago when the company benefited from an extra week of holiday sales. The retailer posted quarterly earnings of 45 cents a share, slightly higher the 42 cents a share that analysts expected.
The company posted a drop of 6% in its second-quarter revenue to $1.83 billion, down from $1.95 billion a year earlier. Analysts forecast revenue of $1.84 billion in the quarter, according to Thomson Financial. The drop in revenue came as the retailer had to face a difficult consumer environment brought by the U.S. housing market slowdown, high gas prices and credit crisis.
The result? Wall Street is rising, with the Dow industrials climbing over 200 points (211 as I write this). The broader S&P 500 is not shying from the rally either, soaring 1.8%, and the Nasdaq composite is up a cool 2.75%.
It is no surprise then to find that Wal-Mart Stores Inc. (NYSE: WMT) actually set a new 52-week high today, climbing to $54.15 before settling back a bit at $53.76, or 1% higher. While no specific news is driving Wal-Mart at the moment, its stock has seen nice price movement lately, as many have bet the discount retailer would fare well in a slowing economy / recession.
Theflyonthewall.com believes that the breakout is technical, saying that after the $51.50-$52 level served as a "major overhead resistance area for 3 years and was a major support area for the 2 years prior," WMT could break out if it climbed above that level. Not only that, but "breakouts of this type, which have developed over a long period of dull range trading, often produce extreme and persistent movement in the direction of the breakout." Meaning, that if the stock doesn't revert back, we could see WMT shares gain strong upward momentum.
While perhaps not breaching 52-week records, other retailers are performing well today too. Continued falling commodity prices have eased inflation concerns, putting retailers back in favor. Target (NYSE: TGT) shares are climbing nearly 2.5%; Walgreen (NYSE: WAG), which has reported a 5% earnings growth, is seeing its shares rise over 5.3%; and Family Dollar (NYSE: FDO), another discount store, is soaring over 6%.
TheStreet.com's Jim Cramer says it's still too early to get contrarian about the universal negativity on retail.
Squeeze?
DuPont (NYSE: DD) (Cramer's Take) better than expected. Countrywide (NYSE: CFC) (Cramer's Take) puts up numbers that don't seem bankruptish. We could have a day's respite from the gloom. We certainly are owed one, at least in Nasdaq land.
Plus, when you go out with people from the trading desks, you are overwhelmed by the negativity.
Last night at a buy-side/sell-side dinner, a smart guy I know who loves the short side tried to make a case for some down-and-out airlines and retailers. He's a price guy, meaning that he believes everything has a price and that you have to start looking at a Lowe's (LOW) here or a Macy's (M) because if you start buying now, put some on, you will be getting a pretty decent risk-reward ratio.
I thought people were going to throw things at him. He was immediately ridiculed as someone who didn't understand what's out there, the collapse of consumer spending as evidenced by Brinker's (NYSE: EAT) (Cramer's Take) Chili's, AT&T (NYSE: T) (Cramer's Take), Family Dollar (NYSE: FDO) (Cramer's Take) and all of the other usual suspects Tuesday.
Other companies reporting quarterly results on Tuesday included the following:
Constellation Brands Inc. (NYSE: STZ): Third-quarter profit rose 11 percent, lifted by strong liquor sales, a growth in North American wine business, and acquisition of Svedka vodka. Profit for the quarter ended November 30 rose to $119.6 million, or 55 cents a share, from $107.8 million, or 45 cents a share, a year earlier. Analysts polled by Thomson Financial had expected 55 cents per share on revenue of $1.04 billion. However, Constellation lowered its full-year profit outlook, in part due to costs from its recent acquisition of Fortune Brands Inc.
Acuity Brands Inc. (NYSE: AYI): Fiscal 2008 first-quarter earnings fell 7 percent, as a restructuring charge offset higher pricing and increased sales. The company earned $31.1 million, or 72 cents per share, compared with $33.6 million, or 77 cents per share, in the same quarter a year ago. Analysts had expected profit of 82 cents per share on revenue of $500.6 million, according to analysts polled by Thomson Financial. Revenue increased 7% to $508.9 million, from $477.6 million a year ago. The special charge was related to planned actions to streamline operations as a result of the spin-off of Zep Inc.
Looking for stocks to stick under the family Miracle Tree? In this edition of StockWatch: Between the Bells, Amey Stone, business author and editor of BloggingStocks, shares a few stock plays for the holiday season.
Won't your little rocker be stoked if you take a stake in Activision (NASDAQ: ATVI)? The long-time video game maker has had monster success with its Guitar Hero franchise and should enjoy heavy Christmas sales of the latest volume, Guitar Hero III. For the fashionable in your family, Amey suggests Deckers Outdoors (NASDAQ: DECK), makers of the popular Ugg boots. Deckers' shares slipped a little at mid-month but are recently back on the rise.
It seems that Apple Inc.'s (NASDAQ: AAPL) Jobs perfectionism isn't so perfect lately. In the past 24 hours, there have been reports that a number of the new iMacs have been freezing. These are screen freezes, with the exception of the mouse pointer, when underneath the computer keeps running. Meanwhile, it seems that perhaps Apple wasn't intentionally bricking hacked iPhones, perhaps the software update was just a bad one as even non-hacked phones have been known to brick after the update.
It seems that Google Inc's (NASDAQ: GOOG) efforts in China have paid off. Today the search giant said it is closing the gap with rival Baidu.com (NASDAQ: BIDU) in the second largest internet market in the world. Google has increased its market share after it announced its partnership with Sina Corp (NASDAQ: SINA).
eBay Inc (NASDAQ: EBAY) said it has acquired Afterbuy.com, which enables professional trading on eBay's German Website and other online marketplaces. Terms of the agreement were not disclosed.
Family Dollar Stores Inc. (NYSE: FDO) today said fourth-quarter net income rose 17% to $37.8 million, or 26 cents a share. Analysts expected earnings of 25 cents a share, according to a survey by Thomson Financial.
Microsoft Corp's (NASDAQ: MSFT) CEO said Steve Ballmer said at a press conference in Zurich that he did not rule out further acquisitions of a similar size to web advertising firm aQuantive ($6 billion). Research In Motion Ltd. (NASDAQ: RIMM) is expected to post earnings after the close today. Analysts expect a per-share profit of 50 cents for the second quarter. Shares are up some 1.8% in premarket trading ahead of earnings.
Countrywide Financial Corp (NYSE: CFC) was ordered to give confidential information about its stock-grant practices to a pension fund, according to the Los Angeles Times web site.
Bear downgraded shares of Circuit City Stores Inc (NYSE: CC) to Peer Perform from Outperform based on lack of visibility, execution issues, softer consumer environment, potential pricing disruptions, and product cycle concerns.
Merrill downgraded shares of Wells Fargo and Company (NYSE: WFC) to Neutral from Buy to reflect higher credit losses and valuation and KeyCorp (NYSE: KEY) to Sell from Neutral to reflect the company's "weak" revenue growth.
Merrill Lynch downgradedWells Fargo & Co. (NYSE: WFC) to Neutral from Buy, citing the stock's recent outperformance and rising credit losses.
Mattel (NYSE: MAT), which also apologized to China for toy recalls, was upgraded Oppenheimer & Co. analyst Linda Bolton Weiser to Buy from Neutral, with a target of $30. The analyst said that recall-related bad news is now in the past and already priced in. There are a number of catalysts for share price growth like the introduction of new toys related to three movies and others. She expects operating margin expansion and double-digit earnings growth in 2008.
Family Dollar Stores Inc. (NYSE: FDO) was downgraded by JPMorgan anlayst Charles Grom to Underweight from Neutral due to tough competition and a sluggish economy.
Yamana Gold Inc. (NYSE: AUY) was downgraded at CIBC World Market from Sector Outperform to Sector Perform and the price target lowered from $16 to $14.
The least surprising of downgrades come from Bear Stearns of Circuit City (NYSE: CC), to Peer Perform from Outperform.
General Electric (NYSE: GE) has offered €4 billion ($5.6 billion) to buy the property assets which Spanish bank Santander is selling to fund its bid for parts of Dutch bank ABN AMRO.
According to executives at Google Inc. (NASDAQ: GOOG), it's true that U.S. mortgage lenders are cutting advertising budgets due to a global credit squeeze, but they are not likely to reduce internet search marketing anytime soon.
Many of life's little necessities work just as well when purchased at a bargain store, as they do when you buy them in a boutique. That's the basic allure behind those mall outlets that sell all manner of products for a dollar. One of the biggest such outfits in the U.S. refers to its shopping experience as the "Thrill of the Hunt."
Dollar Tree Stores (NASDAQ: DLTR) runs a network of about 3,300 discount variety stores in 48 states, operating under Dollar Tree, Deal$, Dollar Bills and Dollar Express banners. The stores offer housewares, toys, seasonal items, food, health and beauty aids, gifts and books. All items are priced at one dollar, or less. The outlets are generally located in high-traffic strip centers, anchored by mass merchandisers and supermarkets. Family Dollar Stores (NYSE: FDO) is a major competitor.
The firm pleased investors late last month, when it reported in-line numbers for Q2 and offered in-line to upside guidance for Q3 and FY08 results. Management also announced a $100 million accelerated share repurchase.
MOST NOTEWORTHY: American Capital (ACAS), Doral Financial (DRL), E-Trade Financial (ETFC) and Family Dollar (FDO) were today's noteworthy downgrade:
Jefferies downgraded shares of American Capital (NASDAQ: ACAS) to Hold from Buy citing the slowing M&A market and risk characteristics of the company.
Soleil downgraded Doral Financial (NYSE: DRL) to Sell from Hold, on the belief that the recent reverse stock split will increase short-selling activity and discourage speculative buying.
E-Trade Financial (NASDAQ: ETFC) was cut to Neutral from Buy at UBS, citing deteriorating trends in the credit/mortgage markets, lack of near-term catalysts; the firm does not see an M&A deal occurring near-term.
Goldman downgraded Family Dollar (NYSE: FDO) to Neutral from Buy, citing weakness in the low-end consumer and increased pressure from Wal-Mart (WMT)...
OTHER DOWNGRADES:
Wachovia downgraded Tween Brands (NYSE: TWB) to Market Perform from Outperform.
Estee Lauder (NYSE: EL) was downgraded to Neutral from Outperform at Credit Suisse.
Deutsche Bank cut Pearson (NYSE: PSO) to Hold from Buy.
Family Dollar (NYSE: FDO) has settled shareholder lawsuits relating to the backdating of stock options issued to executives at the company. Under the terms of the settlement, Chairman and Chief Executive
Howard Levine, President and Chief Operating Officer
R. James Kelly, board member
George Mahoney and executive
C. Martin Sowers will give up a total of 210,000 stock options.
The company will also institute corporate governance reforms including the adoption of a majority-vote policy for uncontested elections of directors and the election of two additional independent directors.
Here's what bothers me: The company will be taking a charge of $5.7 million related to the settlement, including $3.5 million to cover the attorney's fees of the shareholders who brought the lawsuits.
This is my question: Given that the company clearly had ineffective internal controls that allowed top executives to receive backdated stock options, why should the company's shareholders have to pick up the tab for the legal fees? CEO Howard Levine made more than $3.1 million last year. Since he and other executives and directors were the ones responsible for options backdating, why shouldn't they pay legal fees?
So, you run a chain of stores where everything costs a dollar and you are wondering how to advertise it. One of the biggest such outfits in the U.S. does so simply by referring to its shopping experience as the "Thrill of the Hunt."
Dollar Tree Stores (NASDAQ: DLTR) runs a network of about 3,300 discount variety stores in 48 states, operating under Dollar Tree, Deal$, Dollar Bills and Dollar Express banners. The stores offer housewares, toys, seasonal items, food, health and beauty aids, gifts and books. All items are priced at one dollar. The outlets are generally located in high-traffic strip centers, anchored by mass merchandisers and supermarkets. Dollar General (NYSE: DG) and Family Dollar Stores (NYSE: FDO) are major competitors.
The firm pleased investors earlier in the week, when it reported Q1 EPS of 38 cents and revenues of $975 million. Analysts had been looking for 37 cents and $966.4 million. Management also guided Q2 EPS to 29-32 cents (31 cent consensus), Q2 revenues to $960-$985 million ($963.64M consensus), FY08 EPS to $2.00-$2.12 ($2.10 consensus) and FY08 revenues to $4.28-$4.38 billion ($4.30B consensus). The news kept DLTR shares cycling through a positive three month trading channel. The price is currently at the base of that channel, where Momentum and Stochastic technical parameters suggest the potential for a rise back toward the top.
Brokers recommend the issue with four "strong buys," three "buys" and 10 "holds." Analysts expect a 13% average annual growth rate through the next five years. The DLTR Price to Cash Flow ratio (11.87), Price to Free Cash Flow ratio (18.00), EPS Growth rate (22.58%), Return on Assets (10.46%) and Return on Investment (12.83%) compare favorably with industry, sector and S&P 500 averages.
Institutional investors hold about 95% of the outstanding shares. The stock is one of those used to calculate the S&P 400 MidCap Index. Over the past 52 weeks, it has traded between $23.90 and $44.12. A stop-loss of $36.95 looks good here.
.gif){kind=logo}
TheStreet.com's Jim Cramer says it's still too early to get contrarian about the universal negativity on retail.
.gif){kind=logo}
had been looking for 37 cents and $966.4 million. Management also guided Q2 EPS to 29-32 cents (31 cent consensus), Q2 revenues to $960-$985 million ($963.64M consensus), FY08 EPS to $2.00-$2.12 ($2.10 consensus) and FY08 revenues to $4.28-$4.38 billion ($4.30B consensus). The news kept DLTR shares cycling through a positive three month trading channel. The price is currently at the base of that channel, where Momentum and Stochastic technical parameters suggest the potential for a rise back toward the top.
Just how high will U.S. gasoline prices rise?
Nordstrom and Kohl's post smaller-than-expected Q1 profit declines
Oil hits record $127.43 on supply concerns, raised Goldman forecast
