SAN FRANCISCO Family Dollar Stores Inc FDO.N reported a 36 percent jump in quarterly profit, topping market estimates, and its shares rose 10 percent, as more shoppers scoured its aisles for low prices on food, shampoo and household cleaners.
The company, which sells most of its merchandise for below $10, also provided an updated forecast for the current-quarter that should meet or beat analysts' estimates and said same-store sales in June should be up about 2 percent.
"They've got really good traffic trends right now as consumers look for value-oriented offerings and obviously, that's Family Dollar's sweet spot," said Edward Jones analyst Matt Arnold.
Family Dollar earned $87.7 million, or 62 cents per share, in the third quarter ended May 30, up from $64.7 million, or 46 cents per share, a year earlier.
Analysts on average had expected profit of 59 cents per share, according to Reuters Estimates.
Joseph Feldman, a retail analyst with Telsey Advisory Group, said the 2 percent rise in Family Dollar's June same-store sales was impressive given that it faces a tough comparison to a year ago when it got a boost from shoppers spending tax rebate cash in its stores.
He said the strong results should boost shares of Family Dollar as well as competitors, like Dollar Tree Inc (DLTR.O) and 99 Cents Only Stores NDN.N.
Family Dollar stock rose $2.68 to $30.43, while Dollar Tree advanced $2.35 to $42.94 and 99 Cents Only rose 35 cents to $13.40.
Discounters such as Family Dollar, Wal-Mart Stores Inc (WMT.N) and Dollar Tree Inc have been attracting more shoppers in the recession as consumers seek out low-priced essentials like food, paper towels and beauty products in their stores.
Family Dollar has also added 200 new food products, like Triscuit crackers and Kraft salad dressing.
Last month, Family Dollar said third-quarter sales rose 8.2 percent to $1.84 billion, while sales at stores open at least a year, or comparable-store sales, rose 6.2 percent.
For the fourth quarter ending on August 29, the company expects net sales to increase 4 percent to 6 percent, and it forecast a rise of 2 percent to 4 percent in comparable-store sales.
It now expects fourth-quarter earnings of 39 cents to 43 cents per share, while analysts on average were expecting 39 cents. It had previously said it expected fourth-quarter earnings of 34 to 40 cents a share.
A year ago, Family Dollar got a benefit in its fourth quarter from the U.S. government's economic stimulus package that distributed about $100 billion in tax rebates to 130 million households.
(Additional reporting by Nivedita Bhattacharjee in Bangalore; Editing by Gopakumar Warrier and Lisa Von Ahn and Matt Daily)