Family Dollar Tanks as Costs Steal Profits

NEW YORK ( TheStreet) -- Family Dollar Stores ( FDO) is tanking Wednesday morning, after its first-quarter profit missed Wall Street's forecast.

During the quarter, the discounter earned $74.3 million, or 58 cents a share, from $67.8 million, or 49 cents, in the year-ago period. Analysts were calling for a profit of 61 cents a share for Family Dollar .

The disappointing profit was primarily due to lower gross margins and higher freight costs. Gross margin slipped to 36% from 36.1%.

Nonetheless, on the top line, Family Dollar Chairman and Chief Executive Howard R. Levine said was the best first-quarter performance in more than 12 years.

Family Dollar revenue rose 10% to $2 billion, while same-store sales grew 6.9%, receiving a boost from candy and food sales.

Looking ahead, Family Dollar expects full-year earnings in the range of $3.08 to $3.23 a share, in-line with forecasts of $3.18 a share. For the second quarter, the company is calling for a profit between 92 cents and 97 cents a share, slightly shy of analysts' predictions of $1 a share.

Shares of Family Dollar are tumbling 7.9% to $45.40 in pre-market trading.

--Written by Jeanine Poggi in New York.

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