For many, Family Dollar (NYSE:FDO) conjures visions of relatively small self-service outlets in rural areas underserved by the likes of Wal-Mart (NYSE:WMT), Target (NYSE:TGT) and others. That wouldn't be far off, either, as some three quarters of its stores are in areas sporting fewer than 75,000 residents.

But in recent years the company has stepped up its expansion into denser areas, looking for the value-conscious consumer who has helped it grow to a chain more than 5,000 stores strong -- and the stock to fantastic, market-crushing gains over the last 10 years.

Based on the latest earnings, released yesterday morning, even this change to the formula hasn't stopped Family Dollar from being one of the most interesting retail stories around. For the full fiscal year ended August 30, sales and net income rose 14%. Both new stores and old contributed to the top-line boost, as same-store sales rose 3.5%. Customer count and the average transaction also ticked upward.

The company is looking for similar profit growth in fiscal 2004. Another 500 net stores are planned, along with technological improvements. One, the addition of systems that allow customers to use debit cards would be a glaring absence as Family Dollar continues to urbanize.

Even as it expands, the company continues to generate free cash flow -- some $212 million through the first three quarters of the latest fiscal year. Family Dollar buys back shares, pays a dividend, and keeps a clean balance sheet. In short, it does pretty much everything a Fool would like.

Of course, the market has noticed. The shares are trading near a 52-week high and at a goodly premium to the projected earnings growth rate. But for investors interested in retail companies, here's a great place to start.

Things that Fools like are things that Tom Gardner looks for in his Motley Fool Hidden Gems. You can reach Dave Marino-Nachison at