Matthews-based Family Dollar reported second quarter earnings Wednesday that beat analysts’ expectations but that were weaker than the same quarter last year.
The discount retailer is awaiting regulatory approval of its sale to competitor Dollar Tree, a deal that its shareholders approved in January.
For the second quarter that ended Feb. 28, Family Dollar reported earnings of 67 cents a share, down from 80 cents a share in 2014. Excluding costs related to the pending merger with Virginia-based Dollar Tree, second quarter earnings were 74 cents a share, above the 73 cents a share that Bloomberg-surveyed analysts had expected.
Dollar Tree said this week that it expects the deal to close in May, and that it’ll have to sell about 340 Family Dollar locations to preserve competition for consumers. The stores to be divested, Dollar Tree said, have about $47.4 million in operating income.
The Virginia-based retailer said it is in talks with potential buyers for those stores. In total, Dollar Tree, which sells all items for $1 or less, has almost 5,300 stores, and Family Dollar has about 8,100. Combined, the new company would be the country’s biggest discount retailer.
The company’s quarterly sales rose 3 percent to $2.8 billion, in line with Wall Street expectations. For stores open at least a year, sales rose 0.5 percent, falling short of analysts’ forecasted 1.8 percent growth.
Although sales have improved, Family Dollar’s profit margins have been growing thinner in recent years as the company tried a strategy focused on more promotions and selling more consumable goods, such as food and tobacco. Family Dollar’s financial performance has put pressure on the retailer to either improve or sell itself.
“While our trends in late-February were adversely impacted by severe winter weather, our sales trends in March rebounded nicely, reflecting both improved traffic trends and the benefit of an earlier Easter,” Howard Levine, Family Dollar’s chairman and CEO, said in a statement. “We are excited about the pending merger with Dollar Tree, and our teams are working to ensure a successful integration.”