Family Dollar (NYSE:FDO) sells everything a penny-pincher could ask for at rock-bottom prices. But when pushed to the limit, consumers can only spend so much.

Sure, the discount retailer has had a bountiful year. Economic headwinds pressured shoppers to take advantage of its low-cost consumables, while the added bonus of relatively low fuel prices compared with last year left those shoppers with a bit more cash in their pockets. But Family Dollar can't expect this success to continue indefinitely. The company continues to implement key initiatives to keep its momentum going.

Family Dollar brought in $1.81 billion in revenue -- up 2.6% from last year's quarter -- as it modified store layouts to be more staple-oriented. However, same-store sales grew by a meager 1%, after growing 5.6% last year. Although higher sales of low-margin consumable goods pressured margins somewhat, the impact of lower taxes and freight costs, as well as higher price mark-ups, was strong enough to keep gross margins growing and drive double-digit bottom-line growth. Earnings totaled $60.1 million, or $0.43 per share.

Blood from a stone
Some retailers have been enjoying their time in the sun amid this abysmal economic climate.

Company

 Year-Over-Year Quarterly EPS Growth

Dollar Tree (NASDAQ:DLTR)

50%

Family Dollar

13.2%

Big Lots (NYSE:BIG)

9.4%

BJ's (NYSE:BJ)

4.9%

Wal-Mart (NYSE:WMT)

1.2%

Target (NYSE:TGT)

(3.7%)

Costco (NASDAQ:COST)

(5.6%)

Source: Company financials from most recent quarter, compared to year-ago quarter.

But don't be fooled into thinking that a prolonged recession would turn discounters like Family Dollar into some of the greatest investment stories in upcoming years. Potential increases in unemployment rates, inflation, and fuel costs wouldn't help anyone, even these low-price merchandisers.

And when the economy does turn around, Family Dollar will have to be nimble in realigning its inventory to accommodate increased spending on more discretionary items, which typically generate higher margins.

A delicate situation
During the earnings conference call, CEO Howard Levine said that the company hasn't yet built the impact of a recovery into its financial plans. Who can blame it? With a lot invested in making Family Dollar's stores consumable-centric, the company has also expanded the number of stores that accept food stamps and credit cards as it aims to help insulate its top line. The company expects to see comparable-store sales grow between 3% and 5% in its next fiscal year.

If you think that the low-income consumer will rally, Family Dollar could exceed that guidance and improve margins on increased discretionary spending. Obviously, that would be a best-case scenario, though. If the economy doesn't cooperate, the changes that the company has made will continue to be put to the test.

Further reading:

The Fool owns shares of Costco, which is a Motley Fool Stock Advisor recommendation. Costco and Wal-Mart are Motley Fool Inside Value recommendations. Try any of our Foolish newsletter services free for 30 days.

Fool contributor Chris Jones owns no shares of any company mentioned in this article, nor is he short anything. The Motley Fool's disclosure policy won't stop 'til it gets enough.