EXHIBIT 10 (iii)

May 1, 2002

C. Martin Sowers
Sr. Vice President - Finance
Family Dollar Stores, Inc.
P.O. Box 1017
Charlotte, NC 28201-1017

|Re: | Credit  Agreement  dated as of  August 7, 2001  among  Wachovia  Bank,
National  Association,  f/k/a First Union National Bank,  ("Bank") and
Family  Dollar  Stores,  Inc. and Family  Dollar,  Inc.  (Collectively
"Borrower")
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

You have requested, on
behalf of Borrower, an extension of the Tranche A Termination Date for an
additional period of one year in accordance with Section 2.14 of the Credit
Agreement. Wachovia Bank, National Association agrees to such extension and
hereby agrees to extend the Tranche A Termination Date from May 31,
2003 to May 31, 2004. Further, you have requested, on behalf of Borrower, an
extension of the Tranche B Termination Date for an additional period of 364 days
in accordance with Section 2.15 of the Credit Agreement. Wachovia Bank, National
Association agrees to such extension and hereby agrees to extend the
Tranche B Termination Date from May 30, 2002 to May 29, 2003.
Capitalized terms not otherwise defined herein have the same meaning given to
such terms in the Credit Agreement.

Except as expressly amended
by this letter, the Credit Agreement and all of the other Loan Documents are
confirmed and ratified in all respects and shall remain in full force and effect
in accordance with their respective terms. The Borrower hereby affirms that all
representations and warranties in the Credit Agreement remain true and accurate
as of the date hereof and that no Default or Event of Default has occurred and
is continuing as of the date hereof.

This amendment shall be
effective upon signing by each of the parties to the Credit Agreement and the
Guarantors. Please acknowledge your agreement by signing and returning to me the
enclosed copy of this letter.

Sincerely,

/s/ Stephen T. Dorosh
STEPHEN T. DOROSH
Vice President
Cc:  Mike Grady

Acknowledged and Agreed

|Family Dollar Stores, Inc.                | Family Dollar, Inc.                      
|----------------------------------------- | -----------------------------------------
|                                          |                                          
|By:            /s/ C. Martin
Sowers       | By:            /s/ C. Martin
Sowers      
|Name:       C. MARTIN SOWERS              | Name:       C. MARTIN SOWERS             
|Title:         Sr. Vice President-Finance | Title:         Sr. Vice President-Finance

Each of the Guarantors
below acknowledges and consents to this amendment and ratifies its Guaranty:

|Family Dollar Services, Inc.              | Family Dollar Operations, Inc.           
|----------------------------------------- | -----------------------------------------
|                                          |                                          
|By:            /s/ C. Martin
Sowers       | By:            /s/ C. Martin
Sowers      
|Name:       C. MARTIN SOWERS              | Name:       C. MARTIN SOWERS             
|Title:         Sr. Vice President-Finance | Title:         Sr. Vice President-Finance

Family Dollar Trucking, Inc.
By:            /s/ C. Martin Sowers
Name:       C. MARTIN SOWERS
Title:         Senior Vice President-Finance