UPDATE: Sterne Agee Downgrades Family Dollar Stores on Expected Challenges Ahead

In a report published Friday, Sterne Agee analyst Charles Grom downgraded the rating on Family Dollar Stores (NYSE: FDO) from Neutral to Underperform, and lowered the price target from $62.00 to $56.00.

In the report, Sterne Agee noted, “We are downgrading shares of FDO to Underperform with a new $56 PT. With a DG-led takeout unlikely near-term, we think fundamentals will return into focus, which given today's ultra-competitive retail backdrop could expose both 1) EPS to the downside (both SSS and GPM) and 2) the company's structural issues. As a result, at $68 and ~17x, both the ‘P' and the ‘E' look extended, particularly relative to Buy-Rated DG (15x, EPS intact).”

Family Dollar Stores closed on Thursday at $67.60.