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Family Dollar a hot commodity


MATTHEWS, N.C. -- Family Dollar today showed why dollar stores are such a hot commodity right now by reporting a comparable-store sales increase of 5.1% for the second quarter ended Feb. 26. Net sales for the quarter increased 8.3% to $2.26 billion from $2.09 billion last year. According to the company warmer weathr earlier in the year as well as strong performance in its consumable and seasonal categories helped drive sales.

“Family Dollar continues to execute well against our strategic plan to accelerate revenue growth, expand operating margins and optimize our capital structure,” said Howard Levine, chairman and CEO. “Our investments to improve the shopping experience for our customers while enhancing our operational capabilities continue to deliver strong returns.”

The company said it now expects that earnings per diluted share for the second quarter of fiscal 2011 will be in the range of 97 cents to 98 cents per diluted share, compared with 81 cents per diluted share for the second quarter of fiscal 2010.

Family Dollar's second-quarter performance will make it even more enticing to investors who have shown a growing interest in discount stores. Last month, Family Dollar Stores received a buyout offer from a New York hedge fund at $55 to $60 per share, a 36% premium over yesterday’s closing price. The offer, which values the company at up to $7.6 billion, was made by Trian Group, which is headed by activist investor Nelson Peltz.

Investors have also shown interest in other dollar stores. 99 Cents Only Stores, according to the Associated Press,has received a proposal to take the company private from the company's founding family and investment firm Leonard Green & Partners LP for $19.09 per share, the Associated Press reported.

The offer would value the company at about $1.3 billion. According to 99 Cents, the purchasers would include the Schiffer-Gold family, which owns about 33% of its outstanding stock. David Gold is company founder and chairman, and his son-in-law Eric Schiffer is CEO.

Whether any of the aforementioned deals go through remains, to be seen, but it is clear that is a good time to invest in dollar stores while they still have a strong appeal to consumers still looking to save in difficult economic times.

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