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Frugality Drives Family Dollar

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 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 Q1 last year.

The store is also appealing to a wider variety of customers, chairman and ceo Howard Levine told analysts during the 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.

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 Q1, 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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