The Goodlettsville, TN-based company, which operates 7,712 stores in 30 states, said sales of its seasonal, clothing and home products, as well as food, beauty and cleaning brands helped sales increase 12.5%, better than sales for rivals Wal-Mart, which posted a 10.2% increase and Dollar Tree Stores Inc., which had a 9.2% gain in sales.

"I'm very pleased with the results of our second quarter," David Perdue, chairman and chief executive officer, said on the conference call to investors and analysts Thursday.

But Purdue said rising gas prices, high consumer debt, unemployment and rising interest rates were having an impact on spending by its lower-income customers. Those factors are expected to drive down profits for the current quarter as customers cut back on shopping, he said. The company has already seen the impact. Profits for the current quarter were already down 8%, the company said. Profits for the third quarter were expected to be between 19 cents to 21 cents per share, including costs of 2 cents to 3 cents a share from changes to the way it calculates inventory.