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Retail chain chief says he's 'bullish' on food stamps

January 7, 2009 |  7:42 pm

A sign of the economic times: Bargain-price retailer Family Dollar Stores Inc. sees a big growth opportunity in food stamps.

The Matthews, N.C., company told analysts Wednesday that it would speed up its "store of the future" rollout so that nearly all of its 6,600 stores nationwide would accept federal food stamps by the end of 2009.

Currently, about 3,000 of the chain’s stores take the stamps as payment.

Howard Levine, Family Dollar’s chairman, told analysts in a conference call that about 14 million U.S. households relied on food stamps as of September, a jump of 17% from a year earlier.

Foodstamplogo "The expansion of our food assortment, combined with the upgrade of our point-of-sale technology, positions us well to serve this growing population of customers," he said.

Levine declined to break out the company’s food stamp sales, but he said the decision to accelerate the store-upgrade program "gives you an indication of how bullish we are about that opportunity."

In October the government changed the name of the food stamp program to the Supplemental Nutrition Assistance Program, or SNAP.

Family Dollar, which operates in 44 states (California isn’t one of them), was among the relative few stocks that rose last year, gaining 35% as investors bet the company would benefit from a new national frugality as the economy worsened.

The stock pulled back a bit in December. But Wednesday it shot up $3.48, or 14.3%, to $27.81 after the firm reported better-than-expected earnings for the quarter ended Nov. 29 and raised its estimates for the current quarter.

Net income last quarter rose 14% from a year earlier, to $59.3 million, or 42 cents a share. Sales were up 4.2% to $1.75 billion.

The retailer said it expected to earn 48 to 52 cents a share in the current quarter, compared with analysts’ median estimate of 47 cents.

Investors have been willing to pay up for growth: At $27.81, the stock is valued at about 16 times analysts’ median earnings estimate of $1.72 for the current fiscal year.

That’s about the same price-to-earnings ratio as on shares of Family Dollar's much bigger rival in the bargain-retail sector, Wal-Mart Stores Inc. -- and a much higher valuation than the P/E of 10 on shares of upscale retailer Nordstrom Inc.

-- Tom Petruno