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Extreme discount shopping drives Family Dollar’s 1Q

Matthews, N.C. – Although Family Dollar’s home business had “a nice rebound” in December, it is consumables that have been driving results at the extreme value retailer.

Reporting results for the first quarter ended Nov. 29, 2008, executives today said Family Dollar experienced increases in average traffic, average ticket and in margin. Consumables accounted for 66% of sales during the quarter vs. 61% in the previous year’s first quarter.

The store is also appealing to a wider variety of customers, chairman and ceo Howard Levine told analysts during this morning’s quarterly conference call.

“Today, customers of all income levels are looking for ways to stretch their dollar,” he said.

As more families are now using food stamps, the 6,660-unit retailer is accelerating the number of units that can process food stamps and credit cards. At the end of the first quarter, about 3,000 were equipped to do so, according to president, coo and cfo Jim Kelly. By the end of next year, all stores will have the capability.

“In September 2008, there were 14 million households relying on food stamps. That was up 17% from September 2007,” said Kelly.

Still, executives repeatedly referred to 2009’s economic climate as “uncertain.” Family Dollar is expecting earnings per share for the year of $1.63 to $1.81, with a net sales increase of 4% to 6% and comp growth of 2% to 4%.

For the second quarter, the company forecast EPS of 48 cents to 52 cents vs. EPS of 45 cents in last year’s second quarter. Family Dollar expects sales growth of 5% to 7% and a comp increase of 3% to 5%.

For the recent first quarter, Family Dollar reported a 14.1% profit increase to $59.3 million, or 42 cents per share. Sales rose 4.2% to $1.68 billion, while comps rose 2.1%.

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