Deutsche Bank Provided Color on Family Dollar Stores, Buy

Deutsche Bank provided color on Family Dollar Stores FDO after a meeting with its management. In a research report published today, Deutsche Bank maintained its optimistic outlook on the company's future. Deutsche Bank has a Buy rating and a price target of $60 on Family Dollar's shares. In the report, Deutsche Bank states, "We see a number of positive comp drivers in place for FDO to hit their 5%-7% guidance even as comparisons become harder and gas prices re- main elevated... Fuel will remain a challenge on gross margins, but offsets will include in- crease in sourcing, price optimization and shrink. Also, FDO is beginning to take higher margins in its private label business after spending several quarters improving the products brand image. As a reminder, these offsets help drive a 30 bps improvement in gross margin in 2Q11 despite higher gas prices. FDO's mix, which skews more towards discretionary items versus DG, may make it harder for FDO to close the sales per foot gap with DG, but the EBIT per foot gap, which is currently at about 70%, should be easier to close as these discretionary areas are more profitable." In today's trading, Family Dollar added 0.02% to its value to trade around $54.36.