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Can Family Dollar Stores, Inc. (FDO) Earnings Bounce Back?

Family Dollar Stores, Inc. (NYSE:FDO) will release its latest quarterly report on Wednesday. Shareholders, however, have started the celebration early, bidding up the company’s stock in the expectation that Family Dollar earnings will manage to grow even in a somewhat tepid overall economic environment.

Family Dollar Stores, Inc. (NYSE:FDO)

As a deep-discount retailer, Family Dollar has emerged as one of the giants in the fast-growing business. But intense competition both from deep-discount rivals and from other retailers seeking to protect their turf has forced the company to work hard to find new growth opportunities and maintain its competitive edge. Let’s take an early look at what’s been happening with Family Dollar over the past quarter and what we’re likely to see in its quarterly report.

Stats on Family Dollar

Analyst EPS Estimate $1.03
Change From Year-Ago EPS (2.9%)
Revenue Estimate $2.57 billion
Change From Year-Ago Revenue 8.9%
Earnings Beats in Past 4 Quarters 0

Source: Yahoo! Finance.

How will Family Dollar fare at earnings time this quarter?
In the past few months, analysts have been quite negative about Family Dollar Stores, Inc. (NYSE:FDO)’s earnings prospects, having cut their estimates for the May quarter by $0.15 per share and reducing their full-year fiscal 2013 and 2014 consensus earnings figures by around $0.20 to $0.25 per share. The stock, though, hasn’t been affected by those downgrades, with shares rising more than 11% since early April.

Family Dollar Stores, Inc. (NYSE:FDO) rode the wave of deep-discount success for years, making its mark during the recession in 2008 when its stock managed to buck the downtrend that sent most stocks crashing to multi-year lows. But increasingly, Family Dollar has struggled to keep its momentum. Expanding beyond its core product offerings to include items like home goods and clothing hasn’t been unambiguously successful, as those areas are already fraught with competition and could threaten margins.

Still, experts like author and Deloitte Services director Michael Raynor believe that Family Dollar stands out from its rivals even in a crowded sector. Raynor noted late last month that despite the higher-cost operations that Family Dollar has compared to other discount retailer rivals, it is still doing better than Dollar Tree, Inc. (NASDAQ:DLTR) and Dollar General Corp. (NYSE:DG), with advantages in profitability that it’s able to generate from handling its bulk inventory well and maintaining pricing power even on low-cost items.

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