Family Dollar: Another Bad Omen For Retail

NEW YORK ( TheStreet) -- Family Dollar Store ( FDO) is proving just how fearful both investors and retailers are about the second half of the year.

While the dollar store beat third-quarter estimates by a penny, management provided muted guidance. Family Dollar predicts fourth-quarter earnings in the range of 46 cents to 51 cents a share, lower than analysts' estimates of 53 cents.
Family Dollar Store

For the full-year, Family Dollar is predicting earnings in the range of $2.53 to $2.58, which is also below Wall Street's consensus of $2.59 a share.

The forecast is overshadowing what was a relatively strong quarter for Family Dollar, and sending shares tumbling 7.3% to $36.60 in morning trading.

During the third quarter Family Dollar Store earned $104.4 million, or 77 cents a share, a 19% jump from $87.7 million, or 62 cents, in the year prior. Sales jumped 8.4% to $2 billion, while comparable sales grew 7%.

But sales in June slowed, up 5.5%.

Family Dollar Sees Slower Spending

Overall, expectations for the second-half of the year for retailers are being muted. On Tuesday, both Citibank and Goldman Sachs lowered their outlooks for the sector.

Citi analyst Deborah Weinswig cut her estimates and price targets on several big named retailers like Home Depot ( HD), Wal-Mart ( WMT), Target ( TGT) and Macy's ( M).

"The consumer went on a shopping binge in the first quarter of 2010 and the subsequent hangover has set in," she wrote in a note. "A challenging macro environment, lack of fashion and difficult comparisons on the horizon will make this consumer hangover tough to kick."

Still, Weinswig named Family Dollar as one of her top stock picks, upgrading the company to buy.

-- Reported by Jeanine Poggi in New York.

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