Family Dollar's Snow Job Melts Under Scrutiny

NEW YORK (The Deal) -- Discount chain Family Dollar Stores  (FDO) said Thursday it will close 370 stores, scale back new store openings and lay off workers after reporting disappointing results.

Net sales for the company's second quarter, which ended March 1, declined to $2.7 billion from $2.9 billion for the same period a year prior, while net income fell to nearly $91 million versus about $140 million for the same period a year ago.

Family Dollar noted, however, that the quarter included 13 weeks as opposed to the 14 weeks that comprised the similar quarter a year ago, with the extra week constituting nearly $190 million in sales and 7 cents of earnings per share. The company also blamed the weather for the poorer results, reducing earnings per share by another 5 cents.

"The 2013 holiday season was challenged by a more promotional competitive environment and a more financially constrained consumer. In addition, like many retailers, our second quarter results were significantly impacted by severe winter weather, which resulted in numerous store closings, disrupted merchandise deliveries and higher than expected utility and store maintenance expenses," said Howard Levine, Family Dollar's chief executive, in a statement.

But there is obviously more to Family Dollar's story than just the loss of a week and too much snow. The store closures, workforce reductions and shrinking ambitions for new stores are likely the products of longer-term problems. Industry watchers suggest the company is not being run as well as some of its competitors.

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