Despite booking record third quarter results which saw higher sales contribute to a 12.1% jump in profit, US discount retailer Family Dollar Stores admits that demand for more discretionary categories like apparel continues "to be challenged."

That said, sales of apparel and accessories edged up 1.1% to $226.8m during the quarter, up from $224.2m a year earlier. But over the first three-quarter of the financial year, the category has seen sales fall 2.7% to $618.9m.

The company, which sells a range of products including consumables such as food, electronics, health and beauty items, and tobacco, competes with grocers, convenience stores and mass merchants like Wal-Mart from more than 7,200 stores.

"It is clear that consumers continue to face difficult economic headwinds," CEO Howard Levine, Chairman and CEO told analysts on an earnings call yesterday (28 June). "While consumer expectations for inflation have moderated recently, unemployment rates have given up gain and consumer confidence is deteriorating."

The retailer's lower-income shoppers are "very stressed," Levine continued, and "very focused on value." The "paycheck cycle" in which consumers delay purchases until they have been paid, is "probably growing in significance," he added.

As well as economic uncertainty, apparel sales have been buffeted by the weather - although despite an overall volatile performance from the category, warm weather in March helped apparel deliver its strongest performance in five quarters, the company said.

The retailer is also optimistic that the addition of Debra Remme as its new vice president of apparel will help put apparel on the right track. Remme, who joined during the quarter, will work under Paul White, who was promoted to chief merchandising officer in December after serving as senior vice president of apparel, home and seasonal.

In the three months to 26 May Family Dollar posted a net profit of US$124.5m as net sales climbed 9.6% to reach $2.36bn. Comparable-store sales rose 5%.