The 6,200-store chain said it expects first quarter earnings torise 5.8% to $54.4 million, or 36 cents per share, compared withlast year's first quarter when net income was $51.4 million, or 32cents per share. Revenue for the quarter ended Nov. 25 was up by 6%to $1.6 billion from $1.51 billion the prior year.

The company says the quarterly results were preliminary due toan internal review of the firm's stock option granting practices.The review is the result of a lawsuit filed against the firm, whichalleges some of its stock option grants were backdated. FamilyDollar said the first quarter results did not take into account anyadjustments that may be needed once the review is complete.

The Matthews, NC discount retailer, which opened 87 new storesand closed eight during the quarter, said the quarterly resultsreflected improved inventory controls and better merchandisingefforts that have helped increase customer spending while cuttingback on inventory expenses.