Family Dollar's third-quarter net profit beat analysts’ estimates, but the company's stock fell on management’s less upbeat forecast for the rest of the year.

"The environment remains challenging for consumers, and customers continue to buy close to need," stated Howard Levine, chairman and chief executive officer of the deep discount store chain.

MATTHEWS, N.C. — Family Dollar Stores Inc. reported a 19% increase in third-quarter net profit and beat analysts’ estimates, but management’s cautious outlook for the fourth quarter and fiscal year triggered an 8% drop in the retailer’s share price in early trading on Wednesday.

Family Dollar Stores Inc. reported a 19% increase in third-quarter net profit and beat analysts’ estimates, but management’s cautious outlook for the fourth quarter and fiscal year triggered an 8% drop in the retailer’s share price in early trading on Wednesday.

Net income for the quarter ended May 29 was $104.4 million, or 77 cents per diluted share, as sales rose 8.4% to $1.99 billion. Analysts surveyed by Thomson Reuters expected earnings of 76 cents per share, on average.

The company’s impressive operating performance in the quarter was overshadowed by earnings guidance that disappointed Wall Street. Operating profit increased 22% to $170.1 million, or 8.52% of sales, from $139.0 million, or 7.54% of sales, a year ago. Gross margin expanded 37 basis points to 36.57% of sales while selling, general and administrative expenses declined 61 basis points to 28.05% of sales.

"We continue to deliver great value for our customers while improving their shopping experience in our stores," said Howard Levine, chairman and chief executive officer. "Our revenue growth has accelerated nicely, and I am pleased to report our ninth consecutive quarter of double digit earnings per share growth."

Investors, however, reacted sharply to management’s slightly lowered forecast of fourth-quarter earnings per share between 46 cents and 51 cents per share, below the 53 cents per share expected by analysts. For the year, the company expects to earn between $2.53 and $2.58 per share. In addition, the company projected comparable-store sales growth of 5% to 7% for the quarter, compared with 7% growth achieved in the third quarter.

"As we look to the fourth quarter, we expect that many of the trends we saw in the third quarter will continue," said Levine. "However, the environment remains challenging for consumers, and customers continue to buy close to need."

In a research note, William Blair & Co. analyst Mark Miller noted that Family Dollar is cycling a number of benefits, including the fiscal stimulus and expansive jobless benefits. Miller did not change his full-year earnings estimate of $2.58 per share and maintained a Market Perform rating on the stock.