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Family Dollar profit tops estimates

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Family Dollar Stores Inc. (FDO-N) reported a better-than-expected quarterly profit as sales rose during the holiday season and it sold more food.

The second-largest dollar-store chain behind Dollar General Corp. (DG-N) has been adding hundreds of food items to its stores and giving many of the stores makeovers as it works to appeal to lower-income shoppers focused on buying essentials.

Family Dollar's net profit rose to $136.4 million US, or $1.15 a share, in its fiscal second quarter ended February 25, from $123.2 million, or 98 cents a share, a year earlier. Analysts were looking for $1.13 a share, according to Thomson Reuters I/B/E/S.

Sales at the chain, where most merchandise costs less than $10, rose 8.6 percent to $2.46 billion, in line with analyst estimates.

Sales at stores open at least a year, or same-store sales, rose 4.5 percent, versus the company's forecast of 5 percent.

Sales were once again driven by consumables, such as food and other basic goods. Gross profit, as a percentage of net sales, slipped to 34.9 percent from 35.7 percent a year earlier, due largely to stronger sales of consumables, which typically carry lower margins than items like clothing and toys.

For the full year, the company said it expects earnings of $3.55 to $3.75 per share. It previously forecast $3.50 to $3.75.

Last week, Dollar General posted higher-than-expected quarterly earnings and sales and said it expected that momentum to continue this year. Its same-store sales rose 6.5 percent.

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