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Family Dollar sales miss Street view, shares slip

By Jessica Wohl

(Reuters) - Family Dollar Stores Inc's quarterly sales rose less than expected, and its shares fell 3 percent in after-hours trading on Thursday even though its profit was in line with forecasts.

The retailer, which sells low-priced food, clothing and other goods, has seen its customers focus more on the basic necessities in a sluggish U.S. economy. While its low prices continue to lure shoppers, those who visit the chain are often buying lower-priced, lower-margin items such as food.

"The environment continues to be challenging for our customers," Chairman and Chief Executive Howard Levine said in a statement.

Same-store sales, or sales at stores open for a year or longer, rose 4.1 percent in the quarter that ended in late November and 4 percent in December.

Rival Dollar General Corp last month reported a 6.3 percent rise in same-store sales for its quarter that ended in late October.

Sales growth at both of the so-called dollar stores, which also sell items for more than $1 each, has exceeded growth at Wal-Mart Stores Inc's Walmart U.S. chain, where same-store sales rose 1.3 percent in the latest quarter after nine consecutive quarterly drops.

Shares of Family Dollar, which plans to speak with analysts and investors on a call on Friday morning, slipped to $56.40 in after-hours trading.

CONSUMABLES DRIVE SALES

During the quarter, Family Dollar saw more customers make purchases and spend more when they shopped.

Family Dollar earned $80.4 million, or 68 cents per share, in the fiscal first quarter that ended on November 26, up from $74.3 million, or 58 cents per share, a year earlier.

Analysts, on average, expected it to earn 68 cents per share, according to Thomson Reuters I/B/E/S. The company had forecast earnings of 65 cents to 73 cents per share.

Sales rose 7.6 percent to $2.15 billion, while analysts were looking for sales of $2.17 billion.

Sales were once again driven by consumables, such as food and other basic goods. Quarterly gross profit fell to 35.3 percent of net sales from 36 percent a year earlier, due largely to stronger sales of consumables, which typically carry lower margins than items such as clothing and toys.

For the second quarter, Family Dollar forecast same-stores sales growth of about 5 percent and earnings of $1.10 to $1.18 per share, up from 98 cents per share a year earlier.

It still expects to post fiscal year 2012 earnings of $3.50 to $3.75 per share, up from $3.12 in fiscal 2011.

Analysts have been expecting it to earn $1.14 per share in the current quarter and $3.65 per share this year.

Family Dollar, which already has more than 7,100 stores in 45 U.S. states, said it still plans to open 450 to 500 new stores in fiscal 2012 -- a more than 50 percent increase over store openings in 2011 -- as it tries to tap into demand from bargain-hungry consumers. Dollar General, the leader with more than 9,800 U.S. stores, has said that it plans to open 625 stores this year, including its first shops in California and Massachusetts.

(Reporting by Jessica Wohl in Chicago)

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