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Family Dollar results show lower-income shoppers still pressured

A Family Dollar store is seen in Chicago, June 25, 2012. REUTERS/Jim Young
A Family Dollar store is seen in Chicago, June 25, 2012. REUTERS/Jim Young

By Dhanya Skariachan

(Reuters) - Family Dollar Stores Inc reported a weaker-than-expected quarterly profit and gave a tepid outlook for the current period after it discounted more than it had originally planned to win shoppers in the key holiday shopping season.

Shares of the discount chain fell 7.3 percent to $61.50 in premarket trading on Thursday.

The company also said President and Chief Operating Officer Michael Bloom had resigned to pursue other interests and that it would conduct a search for a replacement.

Net income fell to $78 million, or 68 cents a share, in the first quarter ended November 30 from $80.3 million, or 69 cents a share, a year earlier.

Analysts on average were expecting a profit of 69 cents a share, according to Thomson Reuters I/B/E/S.

"Our core customers continued to face economic uncertainties, and the promotional environment intensified," Chief Executive Officer Howard Levine said.

Dollar stores have battled a weak economy and increased competition from discounters such as Wal-Mart Stores Inc , which are offering more items priced at $1 or less to woo thrifty shoppers.

In October, Family Dollar said it was taking a cautious approach to 2014 as shoppers focused on basics.

Net sales in the first quarter rose 3.2 percent to $2.50 billion, but missed the analysts' estimate of $2.51 billion.

Sales at stores open at least a year fell 2.8 percent on fewer customer transactions and a drop in the average transaction value.

For the second quarter, the company expects same-store sales to fall in the low-single-digit percentage range. It forecast earnings per share of between 85 cents and 95 cents, below the profit of $1.21 a year earlier.

(Reporting by Dhanya Skariachan; Editing by Lisa Von Ahn)

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