NEW YORK — Profits at Family Dollar Stores climbed 20 percent in its third quarter ended May 27, though the budget-oriented general merchandiser said the improvement largely stemmed from gains in hardlines at the expense of apparel.
Earnings rose to $50.1 million, or 29 cents a share, from $41.8 million, or 24 cents, a year ago. Sales rose 13.5 percent to $770.8 million from $678.9 million. Same-store sales gained 5.4 percent, but softline sales decreased 4 percent due to an increase in space allocated to food, household chemicals and paper products, as well as seasonal and gift categories and a reduction in space for apparel. Hardline sales gained 9.4 percent.
“The current space-reallocation program responds to customer demand for more basic consumables, as well as an expanded selection of gift and seasonal items,” said Howard R. Levine, president and chief executive. “Additional consumables sales generated by this program will be at a lower gross profit margin percentage but will provide opportunities for further leveraging of our expenses. The program is expected to be complete in all stores by October.”
Softlines, which include apparel, shoes, linens, blankets, bedspreads and curtains, have already been reduced from about 39 percent of Family Dollar’s sales mix in the mid-1990s to 31 percent last year, as the chain has broadened its assortment of basic and seasonal hardlines merchandise.
In the nine months, earnings climbed 25.3 percent to $171.9 million, or 82 cents a share, from $113 million, or 65 cents, a year ago. Sales increased 13.8 percent to $2.34 billion from $2.06 billion.
Based in Matthews, N.C., Family Dollar operates 3,578 stores, each averaging about 6,500 square feet, with most merchandise priced under $10. It plans to add a total of 400 stores in its year ending August 27 and to open between 475 and 500 new stores the following year.

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