Billionaire activist investor Carl Icahn has set his eyes on the beleaguered Family Dollar Stores Inc. (FDO). As per a filing with the Securities and Exchange Commission (SEC.TO), Icahn, along with his affiliates, bought a 9.4% stake in the discount store retailer for nearly $265.8 million. Following the development, shares rose 10% in after market trading on Jun 6, 2014.
After taking on the bellwethers like Apple Inc. (AAPL) and eBay Inc. (EBAY) in the past couple of years, Icahn now targets Family Dollar and is likely to push the company’s management to implement strategic changes and if required might seek board representation as well.
Icahn is not the only big shareholder in the company. Other high profile investors like Nelson Peltz's Trian Fund Management LP and John Paulson’s Paulson & Co. owe 7.4% and 5.7% stake in Family Dollar, respectively.
Following the disclosure, Family Dollar issued a statement that it was open for talks with all shareholders as it is constantly looking to maximize shareholder value.
Family Dollar has been in troubled waters for sometime now. The tepid economic recovery and increasing competition from other big brick and mortar retailers along with online giants has affected sales and profitability. The company posted a 6.1% decline in sales and a 6.7% drop in gross margin for the second quarter of fiscal 2014.
Consequently, Family Dollar announced a number of measures to improve its operational and financial performances. Management intends to reduce prices of 1,000 basic items, optimize cost structure by lowering the headcount and close 370 underperforming outlets and be more rationale on new store opening to reap higher return on investment.
Notably, store portfolio rationalization is in stark contrast to its peers like Dollar General Corp. (DG), which is on a store expansion drive. Dollar general intends to openabout 700 new stores in fiscal 2014.
Though Icahn has not disclosed his plans as regards to improving the shareholder value, but as per the filing, Family Dollar’s condition is similar to that of the other troubled companies that benefited from Icahn’s involvement, which helped to generate substantial return for the stakeholders.
Currently, Family Dollar carries a Zacks Rank #5 (Strong Sell).