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NEW YORK (Reuters) - Family Dollar Stores Inc FDO.N posted a higher quarterly profit on Wednesday, in line with Wall Street expectations, and raised its full-year outlook again as consumers seeking to stretch their budgets shopped in its discount stores.
Its shares rose 7 percent to a new high for the year.
Family Dollar and other discounters such as Wal-Mart Stores Inc (WMT.N) and Dollar Tree Inc (DLTR.O) have been doing well in the economic downturn as consumers look for low-priced essentials like food and cleaning supplies.
Responding to consumer demand, Family Dollar has been stocking more consumable items like food in its stores and cutting back on space for discretionary items such as clothes. The company sells most of its items for under $10.
"Our strategy of providing both value and convenience continues to resonate well with consumers, and, as a result, we continue to capture more shopping trips and gain market share," Chief Executive Howard Levine said in a statement.
Steps it has taken to woo shoppers, such as improving the quality of its merchandise, could also help it win the approval of first-time customers, Levine said.
Family Dollar posted a profit of $84.1 million, or 60 cents a share, for its fiscal second quarter ended February 28, compared with $63.3 million, or 45 cents per share, a year earlier.
Analysts had expected a profit of 60 cents a share.
Sales rose 8.7 percent to $1.99 billion.
In March, Family Dollar said second-quarter same-store sales rose 6.4 percent, beating estimates for a 3.6 percent gain, as shoppers snapped up consumable items like food.
The company, which operates more than 6,600 stores in 44 states, caters to lower-income shoppers, many of whom make less than $30,000 a year. Its stores are filled with inexpensive merchandise such as laundry detergent, paper towels, shower curtains and sandals.
With the economic climate crimping household budgets, Family Dollar has said its core shoppers are spending more when they visit its stores, and it is attracting more "middle-ish income" customers. As an increasing number of Americans use food stamps, it is accepting them as payment at more stores.
Analysts have also said Family Dollar could benefit from the U.S. government's economic stimulus plan, which includes a worker tax credit of up to $400 per individual and $800 for couples.
Family Dollar raised its forecast for the second time for the fiscal year ending August 29. It now expects a sales increase of 5 percent to 7 percent, a same-store sales rise of 3 percent to 5 percent, and earnings of $1.90 to $2.00 per share.
In January it forecast earnings of $1.63 to $1.81 a share and a sales increase of 4 percent to 6 percent.
Analysts expect it to earn $1.91 a share.
For the third quarter, Family Dollar forecast earnings of 54 cents to 58 cents a share, with sales up 7 percent to 9 percent and same-store sales up 5 percent to 7 percent. Analysts expect it to earn 51 cents a share.
The company's shares rose $2.30 to $34.96 in morning trade on the New York Stock Exchange.
Reporting by Aarthi Sivaraman; additional reporting by Nicole Maestri; Editing by John Wallace, Dave Zimmerman