SEATTLE - Family Dollar Stores Inc saw quarterly sales grow less than expected, as store reorganizations it undertook across the country interrupted some shopping, and its shares fell nearly 9 percent.
The retailer, which prices most of its merchandise at $10 or less, rearranged the space in about half its stores during the most recent quarter to stock more consumable items, Chief Executive Howard Levine said in a statement.
But the process hindered consumer traffic and contributed to lower sales growth, Family Dollar spokesman Josh Braverman said.
Though Family Dollar's steps to reset its stores are geared toward attracting shoppers, maybe the company took on a little more than it could chew, Pali Research analyst Stacey Widlitz said in a research note.
There were two issues during resets. First, the disruption itself. Second, categories were moved so customers needed to get acclimated to new layouts, Widlitz said, adding that apparel lost square footage to consumables.
Family Dollar, which had 6,655 stores as of Aug. 29, has been making more room for products like food and paper towels and cutting space devoted to clothing, to cater to consumers' tight needs in the recession.
The company has said it has been attracting more middle-income consumers and winning more business from its core lower-income shoppers as more families want to save money.
The company will continue with that process into the next quarter, Braverman said.
This August, Family Dollar also faced a tough comparison against the same period a year ago, when shoppers spent U.S. government stimulus checks at its stores.
Net sales for the quarter that ended Aug. 29 climbed 2.6 percent to about $1.81 billion. The company had forecast an increase of 4 percent to 6 percent and analysts on average expected revenue of nearly $1.86 billion, according to Reuters Estimates.
Sales at stores open at least a year rose 1 percent, while Family Dollar in July had forecast a rise of 2 to 4 percent.
Family Dollar said it still expects to report a profit of 39 to 43 cents per share for the fourth quarter when it issues full quarterly results on Oct. 7. Analysts' average forecast is 42 cents per share.
Its shares were down $2.65 at $28.34 on the New York Stock Exchange late on Thursday morning, off an earlier low at $27.39.
(Reporting by Aarthi Sivaraman in Seattle and Jessica Wohl in Chicago, editing by Maureen Bavdek, Matthew Lewis and Bernard Orr)