Family Dollar Mens Underwear blamed the margin squeeze mainly on shoppers's inability to afford more discretionary products.
The evidence could be seen recently in the aisles and shopping carts at a Family Dollar store in North Dallas. A large circular rack of clothing marked "clearance" was filled with unsold winter clothes, such as fleece shirts and baby warm-up suits, for $5. Gucci T shirts But even summer clothing, such as $8 white Capri pants and $10 shorts, were being offered on a "buy one get 50% off on a second" basis.
Nearby, Petra Gomez, a mother of five, had filled her cart with dog food and cleaning supplies, including the lilac-scented Fabulosa liquid cleaner. "I have had to put off my wants like sandals and shirts, because money is tight and the kids come first," Ms. Gomez said.
Family Dollar Chief Executive Howard Levine told analysts during the conference call that the company's recent efforts to look for the best ck mens underwear deals from suppliers around the globe and stock more higher-margin private-label foods and other items will help offset some of the company's rising costs, including its stepped-up remodeling program.
But analysts cautioned that
a second consecutive disappointing quarter at Family Dollar, whose growth and operational improvements like remodelings lag behind Dollar General's, could renew speculation about a leveraged buyout of the chain.
In February, Family Dollar rejected a takeover offer from activist investor Nelson Peltz, head of Trian Fund. Since then, activist investor William Ackman of Pershing Square Capital, has amassed just under 10% of the company's stock, making him the largest shareholder.
"We're executing our strategic plan, and hopefully we'll finish our fiscal year in August strong," said a Family Dollar spokesman.
Dollar Tree is the top performer among the three dollar chains, with the highest same-store sales gains and slimmest margin-rate decline.
Dollar Tree sells a lower percentage of food than its rivals and doesn't offer clothing. But it does a brisk business in products like party goods and seasonal decorations, all for just $1. Half its new customers have family incomes of more than $70,000.
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