Insider Purchase & Buybacks: FDO

Family Dollar is among the largest discount retail chains and offers inexpensive retail products with more than 6,400 stores in 44 states. The company registered a strong fourth quarter with earnings rising 17% over the same period last year. The company also said gross margins improved to 33.1% during the quarter ended Sept 1 from 32.4% a year ago. However, September same-store sales only increased 0.5% when compared to the same period last year, and October same-store sales were flat.

High energy prices and slowing consumer spending have hurt the demand for products in Family Dollar. The stock has fallen 24.6% from $30.38 on Aug. 8 to the current level of $22.81, close to its 52-week low of $22.56.

Family Dollar wants to take advantage of this drop to create shareholder value by buying back shares. This week, the company authorized the purchase of $150 million of its common stock, which it expects to fund with cash from operations. During the fiscal year ending Sept. 1, Family Dollar purchased 8.2 million shares of its stock at a cost of about $257.5 million. In September 2007, the company purchased the remaining 2.9 million shares available under previous authorizations.

Though investors have been dumping the stock, management is bullish on the future prospects, which is evident from Chairman and CEO Howard Levine's recent statement: "We continue to believe that our stock is an attractive investment and that our share repurchase program builds value for shareholders."

For fiscal 2008, Family Dollar expects total sales to increase 4% to 6%. Levine said, "In fiscal 2008, we will stay focused on our key initiatives to drive revenues, improve profitability and increase shareholder returns."

More than 250 institutions have a stake in FDO, and they hold 82% of the company's shares.

is a holder of Family Dollar. Eden Capital's other holdings include Orient-Express , Sealed Air and Broadcom .

The market has turned negative on many retailers, with Family Dollar now only trading at six times cash flows. With a modest guidance for fiscal 2008, the stock could easily retrace the lost ground and generate value for investors who have a time horizon of 18 to 24 months. to see the rest of today's Top Insider Purchases & Buybacks on Stockpickr.