Family Dollar Stores, Inc. (FDO) Profit Narrows as Dollar General Corp. (DG) Pressures on With Acquisition

Family Dollar Stores, Inc. (FDO)

Family Dollar Stores, Inc. (NYSE:FDO) reported narrower net profit margin than what analysts had expected. The company reported 66% lower profit, saying that its financial performance had been significantly affected by price reduction meant to attract more shoppers. The retailer, which has been spurning an acquisition effort by Dollar General Corp. (NYSE:DG), also said that the reorganization and merger process have contributed to the reduced profits.

Dollar General Corp. (NYSE:DG) has made several failed attempts to acquire Family Dollar Stores, Inc. (NYSE:FDO), but the company has stood its ground, saying that antitrust risk may interfere with the deal. The company has however accepted to sell itself to the much smaller Dollar Tree, Inc. (NASDAQ:DLTR), which is paying about $600 million less than what Dollar General is offering.

Family Dollar Stores, Inc. (FDO)

Last July, the company had agreed to be acquired by Dollar Tree, Inc. (NASDAQ:DLTR), something that prompted the bigger Dollar General Corp. to come with a higher proposition to secure the deal. The proposition was rebuffed and another one brought forward and equally rejected over the same antitrust fears.

Dollar General Corp. (NYSE:DG) went as far as committing to divest 1,500 stores, in an effort to appease the Federal Trade Commission, and to pay a break-up fee of $500 million in case the deal failed to secure the approval of the commission. The company has finally taken a step to approach the Family Dollar shareholders directly.

The reason why Dollar General is trying so hard to acquire Family Dollar Stores, Inc. (NYSE:FDO) is to stay sturdy against the sweeping influence that companies such as Wal-Mart and Target Corp are wielding in the industry. If a retailer isn’t careful it’s likely to be pushed out of the market.

Family Dollar Stores, Inc. (NYSE:FDO) still managed to rally the market Thursday to post a small high of $77.75 in New York.

This article has been written by Victor Ochieng.

Related News:

Dollar General Corp. (DG) Plans Tender Offer for Family Dollar Stores, Inc. (FDO)’s Shares

Dollar General Corp. (DG) Doubts the Intention of CEO of Family Dollar Stores, Inc. (FDO) Over Acquisition

 

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