UPDATE 3-Dollar General profit zooms as shoppers seek value

* Q1 net income $83 mln vs $5.9 mln year earlier

* Q1 sales up 15.7 pct to $2.78 bln

* Q1 same-store sales up 13.3 pct (Adds comments from conference call on economy, competition)

CHICAGO, June 2 (Reuters) - Dollar General Corp [DG.UL] reported a sharply higher quarterly profit on Tuesday, as cost-conscious consumers flocked to the discount retailer's stores for bargains in the recession.

Dollar General, which sells most of its merchandise for $10 or less, said net income in the first quarter ended May 1 jumped to $83.0 million from $5.9 million a year earlier.

As the recession tightens household budgets, more shoppers have flocked to discount chains such as Dollar General, Wal-Mart Stores Inc (WMT.N), Family Dollar Stores Inc (FDO.N) and Dollar Tree Inc (DLTR.O).

"We are facing a very difficult economic environment which restricts our customer's ability to spend and poses challenges to Dollar General as we try to grow our sales and gross profit," Chief Executive Rick Dreiling, said during a conference call.

Dreiling also emphasized that competitors' advertising and pricing strategies are the most aggressive he has seen in years.

Dollar General's quarterly sales rose 15.7 percent to $2.78 billion, while sales at stores open at least a year, or same-store sales, climbed 13.3 percent.

The company attributed better results not only to new economically aware customers, but also to reduced incidence of theft and broken or otherwise unsalable items -- known as "shrink" in retail circles.

Lower overhead due in part to renegotiated lease terms also helped boost results.

Adjusted earnings before interest, income taxes, depreciation and amortization soared 59 percent to $291 million.

Dollar General added that through May 1, the company has opened 104 new stores and remodeled or relocated 100 more in the current fiscal year, bringing the total number of stores to 8,462 nationwide. Four stores so far have been closed.

The company said it plans capital expenditures of about $250 million to $275 million, as it opens about 450 more new stores and remodels or relocates 400 others.

The company, which is owned by private equity group Kohlberg Kravis Roberts & Co [KKR.UL], operates more than 8,460 stores in 35 U.S. states. (Reporting by Jessica Wohl and Ian Sherr in Chicago and Martinne Geller in New York; Editing by Lisa Von Ahn and Tim Dobbyn)