Family Dollar Sees Less Green

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There were no surprises in Family Dollar's (NYSE: FDO) same-store sales, which rose 1.2% in December. The stock slipped $0.22 to $29.32 on the news. Nonetheless, August shares have enjoyed a rally from their low of $21.59, as has the stock of peers such as Dollar Tree (Nasdaq: DLTR) and Dollar General (NYSE: DG).

In December, Family Dollar's total sales increased 5.7% to $850.7 million, with food and toys among the popular items.

The company is pursuing four key initiatives to drive sales and profitability. First, it's installing refrigerated coolers in selected stores. This should ramp food sales, and perhaps lead to merchandise sales as well. Meanwhile, the company's "Treasure Hunt" merchandise program is a fun promotion to help spur sales by offering low prices on key merchandise. In addition, Family Dollar plans to aggressively open new stores, and to find ways to improve operating performance in urban areas -- no easy task.

Despite these strategies, the discount retail segment as a whole faces headwinds, since a slowing economy may prompt less spending from low-income customers. For January, Family Dollar is forecasting tepid same-store sales growth of 1% to 3%.

Shop around for further Foolishness:

• Family Dollar Still No Bargain
• Family Dollar's Discounted Performance
• Family Dollar's Improving Performance

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Family Dollar is a Stock Advisor selection. Discover all of David and Tom Gardner's stellar stock selections with a free 30-day trial.

Fool contributor Tom Taulli does not own shares mentioned in this article. He is currently ranked 329 out of 19,320 in CAPS. Dollar Tree is a former Inside Value recommendation. The Fool has a disclosure policy.