Family Dollar

Family Dollar (FDO 32.66) reported in-line earnings and improved revenues as budget-conscious consumers helped the retailer increase its net income.

For its fiscal second quarter, Family Dollar reported earnings of $0.60 per share, in-line with the First Call consensus of $0.60.  Net income for the quarter increased 32.9% to $84.1 million.

Revenues rose 8.7% year-over-year to $1.992 billion; the consensus expected $1.982 billion.

Same-store sales during the quarter increased 6.4%.  Family Dollar improved its gross margins to 33.7% from 32.7% in the same period last year.  The company said the improvement in gross profit, as a percentage of sales, was a result of lower seasonal markdowns, lower inventory shrinkage, lower freight expense, and higher purchase mark-ups which more than offset stronger sales of lower-margin consumable merchandise.

Looking ahead, Family Dollar issued upside earnings guidance, saying it expects earnings to range from $0.54 to $0.58 per share, well ahead of the current consensus that expects $0.50.

Family Dollar gave an in-line outlook for FY09, with room for an upside surprise.  The company expects FY09 earnings between $1.90 and $2.00 per share; the consensus stands at $1.90.

For the full year, Family Dollar expects net sales to increase between 5% and 7%.

Shares of FDO are 3.2% higher in premarket trading.