Dollar Store Says Margins May Suffer in Quarter

Family Dollar Stores reported an increase in third-quarter profit yesterday but warned that margins in the current quarter would be pressured by markdowns.

The company, which operates more than 6,300 discount stores, said net income rose 6 percent, to .4 million, or 40 cents a share, in the third quarter ended June 2, from .9 million, or 37 cents a share, a year earlier.

Excluding a .7 million charge for settling a shareholder lawsuit over stock option awards, earnings were 42 cents a share — a penny more than analysts’ average forecast, according to Reuters Estimates.

Family Dollar, which is trying to lift sales by revamping merchandise displays in its stores and adding more food items, said quarterly sales rose 5.4 percent, to .65 billion.

Sales at stores open at least a year increased about 1.5 percent as customers spent more money, offsetting a slight fall in traffic.

Shares of Family Dollar fell 63 cents, to close at .28, on the New York Stock Exchange.

Company executives, who called the current period a “clearance quarter” during a conference call, said Family Dollar used the first week of September each year to mark down and clear spring and summer goods and make way for winter products.

Last year, that week fell in the fiscal first quarter of 2007, while this year it will be in the fourth quarter of the same fiscal year, partly affecting the margin outlook, executives said.

As customers feel the pinch from rising gasoline prices and make fewer trips to stores, Family Dollar has been installing coolers in stores to sell perishable items like milk and eggs in hopes of luring shoppers through its doors more frequently.