Family Dollar Stores, the target of a heated takeover battle between two rival U.S. dollar store chains, said its quarterly net profit nearly halved due to increased discounting and higher sales of lower-margin items such as food and tobacco.
Same-store sales fell 0.4 percent in the first quarter ended Nov. 29.
Analysts on average estimated a 1.4 percent increase, according to research firm Consensus Metrix.
Gross margins fell to 33.4 percent from 34.3 a year earlier.
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The company said on Thursday that it is cutting back on promotional activities and focusing on an everyday low-price strategy to arrest the fall in margins.
Revenue rose 2.3 percent to $2.56 billion.