Dollar Tree's profit, sales beat estimates

A customer walks out of a Dollar Tree discount store in Austin, Texas, U.S., February 27, 2017. REUTERS/Mohammad Khursheed

(Reuters) - Dollar Tree Inc DLTR.O, the biggest U.S. dollar-store chain, reported better-than-expected quarterly profit and sales on Wednesday, helped by lower costs and higher customer spending in its stores.

Shares of the retailer, which also owns the Family Dollar chain, rose 5 percent to $80.05 in premarket trading.

Dollar stores such as Dollar Tree and rival Dollar General Corp DG.N have expanded rapidly in recent years, taking market share from Wal-Mart Stores Inc WMT.N and others, thanks to smaller store sizes, a wider variety of products and prices starting at $1.00.

However, Wal-Mart and peer Target Corp TGT.N are fighting back and seeking to cut food prices. Target on Tuesday signaled it would rely more on low prices at the cost of margins to better compete with rivals.

Sales at Dollar Tree stores open for more than a year rose 2.3 percent on a constant-currency basis in the fourth quarter ended Jan. 28, slightly above the 2.1 percent that analysts polled by research firm Consensus Metrix had expected.

Net income rose to $321.8 million, or $1.36 per share, from $229 million, or 97 cents per share, a year earlier.

Net sales rose 5 percent to $5.64 billion, as more customers visited its stores and also spent more on average.

Analysts on average had expected earnings of $1.32 per share and revenue of $5.62 billion, according to Thomson Reuters I/B/E/S.

Reporting by Sruthi Ramakrishnan in Bengaluru; Editing by Sai Sachin Ravikumar