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Howard Levine, Family Dollar's chief executive, said the idea is to offer low-cost items in a convenient shopping environment.

"We want to create a shopping environment that allows our customers easy access, where they can park right in front of the store and get in and out, yet still enjoy a competitive pricing environment," he told The Charlotte Observer.

The move to add more groceries has been two years in the making.

In order to accept food stamps, Family Dollar must sell milk. That means refrigerated cooler cases must be installed -- something Family Dollar has done in 3,800 of its stores so far.

"Extending the product mix with a limited assortment of refrigerated goods and dairy items should drive incremental sales volume for the dollar store segment," said Edward Jones retail analyst Stephanie Hoff in a research note.

In fiscal 2007, which began late last month, the company says it will increase its food assortment in 1,300 stores and accept food stamps in 750 stores. It will also install coolers for perishable goods at an additional 1,000 stores.

The company also plans to increase its clothing assortment and experiment with new store layouts.

The addition of food stamps should further boost food sales because many of the company's customers can afford to buy groceries only by using food cards, Family Dollar spokeswoman Kiley Rawlins said.

"By not accepting food stamps, that's a whole transaction we've been missing," she said.

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