NEW YORK (AP) -- Shares of dollar stores fell Tuesday, after bellwether Dollar General Corp. warned that it remains cautious about its prospects for the rest of the year despite posting a strong third-quarter profit.
The Goodlettsville, Tenn.-based company said its third-quarter net income jumped 21 percent, helped by strong demand for candy, snacks and seasonal items. Its adjusted earnings of 63 cents per share beat average analysts' predictions of 60 cents per share.
Revenue rose 10 percent to $3.96 billion, matching Wall Street expectations.
The chain, which operates more than 10,000 stores in 40 states, narrowed its full-year profit guidance to a range of $2.82 to $2.85 per share. The guidance includes a gain of about 4 cents per share related to the favorable resolution of tax audits in the second quarter.
Sales are expected to grow between 8 and 8.5 percent. Based on the company's 2011 revenue of $14.81 billion, the guidance implies 2012 revenue of $15.99 billion to $16.07 billion. Analysts expect a profit of $2.85 per share on $16.12 billion in revenue.
Dollar General said that while its sales over the Thanksgiving weekend and the start of the holiday shopping season were encouraging, it remains cautious about the rest of the year, noting that consumer spending remains tight.
Raymond James analyst Dan Wewer backed his "Strong Buy" rating for Dollar General stock, saying that the third-quarter results were good enough to reassure investors that the company's long-term plans and potential remain unchanged.
But he added that concerns about fourth-quarter results would be enough to send the shares tumbling Tuesday. In afternoon trading, Dollar General shares lost nearly 8 percent, or $3.61, to $42.96.
The unease carried over the rest of the sector. In afternoon trading, shares of Family Dollar Stores Inc. tumbled $6.09, or 9 percent, to $64.49, while Dollar Tree Inc. lost $1.66, or 4 percent, to $37.78.