By Jessica Wohl
(Reuters) - Dollar General Corp <DG.N> on Tuesday posted a bigger-than-expected increase in profit and said it remained cautious about the rest of the year despite an encouraging start to the holiday season.
The discount chain said customer confidence and spending was still under pressure and it faced challenges from competing chains.
While Dollar General's latest quarter only ran through November 2, the chain said it was encouraged by results from the Thanksgiving weekend that came later in the month and the start of the holiday season.
The discount chain raised the lower end of its 2012 adjusted earnings forecast and slightly trimmed its sales view.
Profit rose to $207.7 million, or 62 cents per share, in the fiscal third quarter, from $171.2 million, or 50 cents, a year earlier.
Earnings rose to 63 cents per share, after adjusting for items such as expenses from a secondary offering and debt amendment fees, topping the analysts' average target of 60 cents, according to Thomson Reuters I/B/E/S.
Shares of Dollar General rose 33 cents to $46.90 in premarket trading.
SALES JUMP 10 PCT
Sales jumped 10.3 percent to $3.96 billion, in line with analysts' expectations. Sales at stores open at least a year, or same-store sales, rose 4 percent.
Same-store sales gains outpaced recent growth at some competitors. Quarterly same-store sales rose 1.5 percent at Wal-Mart Stores Inc's <WMT.N> Walmart U.S. chain and 1.6 percent at Dollar Tree Inc <DLTR.O>.
However, the results were not as strong as the 5.4 percent same-store sales increase at rival Family Dollar Stores Inc <FDO.N>.
Dollar General, which prices most of its merchandise below $10, generally does well when economic concerns such as high unemployment and rising food prices push those on limited budgets to cut spending.
More shoppers visited Dollar General's stores during the quarter and spent more, on average, than a year ago, it said. Sales of items such as candy, snacks and perishables grew at a faster clip than sales of other merchandise.
Sales of certain basic apparel were strong and but higher-priced clothing sales were weak.
Dollar General is now calling for a fiscal-year profit of about $2.82 to $2.85 per share, versus a September forecast of about $2.77 to $2.85 per share. Both outlooks included about 4 cents per share from the favorable resolution of tax audits in the second quarter.
Analysts' average estimate is $2.86.
Dollar General expects sales to rise by 8 percent to 8.5 percent this fiscal year, after sticking to a forecast of 8 percent to 9 percent growth in September. It expects same-store sales to rise 4.5 percent to 5 percent, versus a September forecast of 4 percent to 5 percent.
For the current fourth quarter, it expects same-store sales to rise 3 percent to 4 percent.
(Reporting by Jessica Wohl in Chicago; Editing by Jeffrey Benkoe)
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