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Family Dollar 2Q net income up on better traffic

Family Dollar Stores Inc. said today its fiscal second-quarter net income rose 10 percent, helped by a better flow of customers and a modest improvement in the value of the average transaction.

The discount store operator, which rejected a takeover bid earlier this month, narrowed its full-year earnings forecast and expects higher earnings than analysts expect.

Its shares rose 57 cents, or 1.1 percent, to $52.97 in morning trading.

Consumers started heading to discount store operators more during the recession as they looked for ways to stretch their money further. With gas and food prices now on the rise, shoppers are still venturing to discount store operators to pick up basics and other goods. They have also found the stores convenient for quick shopping trips.

Family Dollar reported net income of $123.2 million, or 98 cents per share, for the period ended Feb. 26, up from $112.2 million, or 81 cents per share, a year ago.

The performance beat the 96 cents per share that analysts expected, according to a survey by FactSet.

Revenue increased 8 percent to $2.26 billion from $2.09 billion, with the strongest results in the consumable and seasonal categories.

Revenue at stores open at least a year rose 5.1 percent. This figure is a key gauge of a retailer’s performance because it excludes revenue from stores opened or closed during the year.

Family Dollar now expects full-year earnings of $3.13 to $3.23 per share. It previously predicted earnings in a range of $3.08 to $3.23 per share. It expects revenue will increase 8 percent to 10 percent. Analysts expect full-year earnings of $3.12 per share.

For the third quarter, the company anticipates earnings between 92 cents and 97 cents per share. Analysts expect 94 cents a share.

Earlier this month, Family Dollar turned down an approximately $7 billion buyout offer from Nelson Peltz’s Trian Fund, which owns about 8 percent of its shares.

The Matthews company also said earlier this month that it was laying off more than 100 workers, with all of its corporate divisions suffering losses.

Family Dollar runs more than 6,800 stores in 44 states. In September the company said that it plans to open about 300 new stores in fiscal 2011, a 50 percent increase over the number of new store openings in fiscal 2010. It also plans to renovate 600 to 800 stores during that time.

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