Stock Market Project - Family Dollar Stores Inc - Essay Example

Company Information The Family Dollar Stores Inc was opened in 1959 and is now operating more than 6000 stores across the country. Its one of the largest regional based chains in US engaged in the retail business across the different states in the country. The firm is basically considered as a preference by the consumers who are willing to save on their groceries and other retail items. Though not all the items are sold under $1 however, the overall prices are reasonable and considered as affordable by most of the consumers.

Major products of the firm include clothing, food and other household items. Firm is a regional business with little or no presence in other countries of the world however, it has achieved tremendous growth in its domestic market by regularly opening new stores across the country. Firm is reseller and sell retail items such durable and non-durable consumer goods. Competitors’ Overview and Industry Trends Major competitors of the firm include Wal-Mart, Dollar Generation Corporation as well as Dollar Tree Inc.

Wal-Mart is quite bigger in the size with international presence in different countries of the world. However, Wal-Mart is a not a typical dollar store though it offers low priced products to its customers. Other competitors are more or less same in size of the firm and are serving different niche markets. (Hoovers, 2011) Industry trends suggest that personal income as well as the fashion trends will be the dominating factors in clothing and other retail segments. Due to the current economic crisis, the overall purchasing power of the consumers has declined thus restricting the consumers to spend lavishly.

Financial Analysis The overall operating margin of the firm is over 7% with profit margin in the range of 4.5% during the current period of 2010. Sales for the period ending August 2010 showed an increase of 6.3% despite the fact that the overall economic situation of the country was not feasible due to current economic crisis. Recent figures for the quarter also suggest that the firm has been able to record a return on equity of 28.70% with total return on assets of approximately 13%. This performance suggest that the firm has been able to perform well during the period and consistently recorded better performance despite difficult economic situation prevailing in the country.

Stock’s Performance Analysis Firm has a total market capitalization of more than $6 Billions with 122 millions shares outstanding. Past 52 weeks range of prices suggest that the firm has hit the high value of $55.590 whereas the lowest price during the same period was recorded at $35.31. (Bloomberg, 2011). It is also important to note that the firm has been able to withstand the poison pill by rejecting the takeover bid from Peltz Train. (Burritt, 2011) A closer analysis of the firm’s stock performance would suggest that the overall share prices of the firm’s stock fluctuated over the period of time.

During the first few years from 2003, the overall prices gradually increased while facing a dip in the prices during 2006. (Yahoo Finance, 2011). It is also important to note that the share prices of the firm remained stable during the current financial crisis despite the fact that overall consumer activity was low. This may however, be attributed to the fact that firm is considered as cheap chain store offering low cost products to