Underlying Trend For FDO Accelerates

Analyst Patrick McKeever of MKM Partners maintains his "neutral" rating on Family Dollar Stores Inc (NYSE: FDO), while raising his estimates for the company. The target price for FDO has been raised from $35 to $41.

According to MKM Partners, Family Dollar Stores has reported its 2Q10 ahead of the estimates. FDO’s operating margins were better than anticipated on favorable variances in both gross margin and SG&A, the analysts say. Although the improvement in the company’s same-store-sales was marginal, the mix improved and both traffic and ticket increased.

According to MKM Partners, “March same‐store sales jumped 11%, driven by unusually warm spring weather, the earlier Easter and the recent expansion of store hours across the chain. While some sales were likely pulled forward at the expense of the April-May period, the underlying trend does appear to be accelerating, driven by an improving macro and growing traction on merchandising, marketing and operational initiatives.”

MKM Partners raised its EPS estimate for 2010 from $2.40 to $2.53.

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