---

`Form 10-Q

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                               ____________________
(Mark One)

          [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934
                  For the quarterly period ended June 2, 2001

                                       OR

          [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934


                               ____________________


                         Commission File Number 1-6807


                           FAMILY DOLLAR STORES, INC.
             (Exact name of registrant as specified in its charter)


              DELAWARE                               56-0942963
 ____________________________________    ___________________________________
    (State or other jurisdiction of               (I.R.S. Employer
     incorporation or organization)              Identification No.)


                     P. O. Box 1017, 10401 Old Monroe Road
                      Charlotte, North Carolina 28201-1017
                    (Address of principal executive offices)



               Registrant's telephone number, including area code
                                  704-847-6961

                               ____________________



     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X]   No [_]


     Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.


              Class                           Outstanding at July 2, 2001
____________________________________    ___________________________________
   Common Stock, $.10 par value                    171,813,999 shares`

---

`FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
                                      INDEX


                                                                        Page No.
________________________________________________________________________________
Part I - Financial Information

  Item 1 - Consolidated Condensed Financial Statements:

          Consolidated Condensed Balance Sheets -
            June 2, 2001 and August 26, 2000 ..............................    2

          Consolidated Condensed Statements of Income -
            Quarter Ended June 2, 2001 and May 27, 2000 ...................    3

          Consolidated Condensed Statements of Income -
            Three Quarters Ended June 2, 2001 and May 27, 2000 ............    4

          Consolidated Condensed Statements of Cash Flows -
            Three Quarters Ended June 2, 2001 and May 27, 2000 ............    5

          Notes to Consolidated Condensed Financial Statements ............  6-8

  Item 2 - Management's Discussion and Analysis of

          Financial Condition and Results of Operations ................... 9-12



Part II - Other Information and Signatures

  Item 6 - Exhibits and Reports on Form 8-K ...............................   13

  Signatures ..............................................................   13`

`FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
                      CONSOLIDATED CONDENSED BALANCE SHEETS
                              (Unaudited)


                                                -------------------------------
                                                    June 2,      August 26,
                                                     2001          2000
                                                --------------- ---------------

                                            Assets
Current assets:
  Cash and cash equivalents (Note 2)            $   37,682,229   $   43,558,010
  Merchandise inventories                          665,598,497      644,614,067
  Deferred income taxes                             45,524,849       51,563,225
  Prepayments and other current assets              12,825,632       10,937,390
                                                   -----------      -----------
    Total current assets                           761,631,207      750,672,692

Property and equipment, net                        557,138,951      487,585,296

Other assets                                         7,255,735        5,456,363
                                                   -----------      -----------

                                                $1,326,025,893   $1,243,714,351
                                                ==============   ==============

                      Liabilities and Shareholders' Equity

Current liabilities:
  Accounts payable and accrued
    liabilities                                 $  349,624,911   $  404,840,303
  Income taxes payable                               1,761,308        7,176,816
                                                   -----------      -----------
    Total current liabilities                      351,386,219      412,017,119
                                                   -----------      -----------

Deferred income taxes                               43,204,569       33,732,753
                                                   -----------      -----------

Shareholders' equity (Notes 5 and 6):
  Preferred stock, $1 par; authorized
    and unissued 500,000 shares
  Common stock, $.10 par;
    authorized 300,000,000 shares;
    issued 184,283,800 shares at
    June 2, 2001 and 183,636,698 shares
    at August 26, 2000                              18,428,380       18,363,670
  Capital in excess of par                          36,541,830       28,516,899
  Retained earnings                                921,413,846      796,039,456
                                                   -----------      -----------
                                                   976,384,056      842,920,025
  Less common stock held in treasury,
    at cost 12,502,954 shares at
    June 2, 2001 and 12,504,786 shares at
    August 26, 2000 (Note 6)                        44,948,951       44,955,546
                                                   -----------      -----------

      Total shareholders' equity                   931,435,105      797,964,479
                                                   -----------      -----------

                                                $1,326,025,893   $1,243,714,351
                                                ==============   ==============


See notes to consolidated condensed financial statements.



                                       -2-`

`FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
                  CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                                  (Unaudited)


                                                          Quarter Ended
                                                -------------------------------
                                                      June 2,        May 27,
                                                       2001           2000
                                                --------------- ---------------

Net sales                                           $887,037,338   $770,775,831

Costs and expenses:
  Cost of sales                                      574,604,937    498,341,999
  Selling, general and
    administrative expenses                          228,197,825    193,437,710
                                                     -----------    -----------
                                                     802,802,762    691,779,709
                                                     -----------    -----------
Income before provision
  for taxes on income                                 84,234,576     78,996,122

Provision for taxes on income                         30,745,600     28,865,200
                                                     -----------    -----------

Net income                                          $ 53,488,976   $ 50,130,922
                                                    ============   ============

Net income per common share - Basic
   (Note 6)                                         $       0.31   $       0.29
                                                    ============   ============

Average shares - Basic (Note 6)                      171,740,023    171,133,686
                                                    ============   ============

Net income per common share - Diluted
    (Note 6)                                        $       0.31   $       0.29
                                                    ============   ============

Average shares - Diluted (Note 6)                    173,028,565    172,110,443
                                                    ============   ============

Dividends per common share                          $        .06      $ .05 1/2
                                                    ============   ============


See notes to consolidated condensed financial statements.



                                       -3-`

`FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
                  CONSOLIDATED CONDENSED STATEMENTS OF INCOME
                                  (Unaudited)


                                                       Three Quarters Ended
                                                -------------------------------
                                                      June 2,        May 27,
                                                       2001           2000
                                                --------------- ---------------

Net sales                                        $2,744,552,326   $2,342,796,717

Costs and expenses
  Cost of sales                                   1,809,247,257    1,538,887,161
  Selling, general and
    administrative expenses                         690,620,927      580,749,301
                                                  -------------    -------------
                                                  2,499,868,184    2,119,636,462
                                                  -------------    -------------
Income before provision for
   taxes on income                                  244,684,142      223,160,255

Provision for taxes on income                        89,279,400       81,465,200
                                                  -------------    -------------
Net income                                       $  155,404,742   $  141,695,055
                                                 ==============   ==============

Net income per common share - Basic
   (Note 6)                                      $         0.91   $         0.82
                                                 ==============   ==============

Average shares - Basic (Note 6)                     171,458,708      171,873,775
                                                 ==============   ==============

Net income per common share - Diluted
   (Note 6)                                      $         0.90   $         0.82
                                                 ==============   ==============

Average shares - Diluted (Note 6)                   172,615,613      172,878,087
                                                 ==============   ==============

Dividends per common share                       $         .175   $          .16
                                                 ==============   ==============



See notes to consolidated condensed financial statements.



                                       -4-`

`FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
                CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
                                  (Unaudited)


                                                          Three Quarters Ended
                                                   -------------------------------
                                                         June 2,        May 27,
                                                          2001           2000
                                                   --------------- ---------------

Cash flows from operating activities:
  Net income                                        $ 155,404,742    $ 141,695,055
  Adjustments to reconcile net income to
    net cash provided by operating
    activities:
    Depreciation and amortization                      49,569,534       39,927,105
    Deferred income taxes                              15,510,192        1,054,494
    (Gain) Loss on disposition of property
      and equipment                                    (1,094,247)          11,750
    Changes in operating assets and liabilities:
      Inventories                                     (20,984,430)      (5,558,069)
      Prepayments and other current assets             (1,888,242)      (2,593,441)
      Other assets                                     (1,799,372)      (3,086,373)
      Accounts payable and accrued
        liabilities                                   (56,109,561)     (16,736,322)
      Income taxes payable                             (5,415,508)       4,876,028
                                                      -----------      -----------
                                                      133,193,108      159,590,227
                                                      -----------      -----------
Cash flows from investing activities:
    Capital expenditures                             (120,210,954)    (120,146,402)
    Proceeds from dispositions of
      property and equipment                            2,182,012          640,743
                                                      -----------      -----------
                                                     (118,028,942)    (119,505,659)
                                                     ------------     ------------
Cash flows from financing activities:
    Purchases/reissue of common stock
      for treasury                                          6,595      (32,640,505)
    Exercise of employee stock options                  8,089,641        5,476,808
    Payment of dividends                              (29,136,183)     (26,697,299)
                                                      -----------      -----------
                                                      (21,039,947)     (53,860,996)
                                                      -----------      -----------
Net change in cash and cash equivalents                (5,875,781)     (13,776,428)

Cash and cash equivalents at beginning
  for period                                           43,558,010       95,301,411
                                                       -----------      -----------

Cash and cash equivalents at end of period          $  37,682,229    $  81,524,983
                                                     =============    =============

Supplemental disclosure of cash flow information:
  Cash paid during the period for:
    Interest                                        $     553,734    $        --
    Income taxes                                       75,576,727       72,968,113

See notes to consolidated condensed financial statements.



                                       -5-`

`FAMILY DOLLAR STORES, INC., AND SUBSIDIARIES
              NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

1.   In the opinion of the  Company,  the  accompanying  unaudited  consolidated
     condensed financial statements contain all adjustments  (consisting of only
     normal  recurring  accruals)  necessary  to present  fairly  the  financial
     position as of June 2, 2001,  and the results of operations for the quarter
     and the three  quarters  ended June 2, 2001, and May 27, 2000, and the cash
     flows for the three quarters ended June 2, 2001, and May 27, 2000.

     The results of operations  for the three  quarters  ended June 2, 2001, are
     not necessarily indicative of the results to be expected for the full year.
     The  calendar  followed  by the  Company  and  most  retailers  included  a
     non-comparative  fifth week in January  resulting  in an extra week in this
     year's second quarter.

     The Company manages its business on the basis of one reportable segment.

2.   The  Company  considers  all highly  liquid  investments  with an  original
     maturity of three  months or less to be "cash  equivalents."  The  carrying
     amount of the Company's cash equivalents approximates fair value due to the
     short maturities of these investments.

3.   The  preparation of the Company's  consolidated  financial  statements,  in
     conformity  with  generally  accepted   accounting   principles,   requires
     management  to  make  estimates  and   assumptions.   These  estimates  and
     assumptions  affect the  reported  amounts of assets and  liabilities,  the
     disclosure  of  contingent  assets  and  liabilities  at  the  date  of the
     financial  statements,  and the  reported  amounts of revenues and expenses
     during  the  reporting  period.  Actual  results  could  differ  from these
     estimates.

4.   The Company has two unsecured bank lines of credit for short-term revolving
     borrowings of up to $75,000,000  each, or  $150,000,000  of total borrowing
     capacity.  The lines of credit  expire  on May 31,  2003 and May 30,  2002,
     respectively.  Borrowings  under  these  lines of credit  are at a variable
     interest rate based on short-term  market interest  rates.  The Company may
     convert up to $75,000,000 of the line of credit expiring May 31, 2003, into
     either a five or seven year term loan at the bank's variable prime rate.

5.   The Company's  non-qualified stock option plan provides for the granting of
     options to key  employees to purchase  shares of common stock at prices not
     less than the fair market value on the date of grant.  Options  expire five
     years from the date of grant and are exercisable to the extent of 40% after
     the second  anniversary  of the grant and an additional  30% at each of the
     following two anniversary dates on a cumulative basis.



                                       -6-`

`The following is a summary of transactions  under the plan during the three
     quarters ended June 2, 2001, and May 27, 2000.


                                          Three Quarters Ended
--------------------------------------------------------------------------------
                         June 2, 2001                     May 27, 2000
                     -----------------------------  ----------------------------
                      Number of                     Number of
                      shares         Option price   shares          Option price
                      under option   per share      under option    per share
--------------------------------------------------------------------------------

Outstanding-beginning   4,168,775    $ 3.83-$24.75   3,910,750     $ 3.83-$24.75
   Granted              1,313,300    $17.50-$27.25     812,000     $14.75-$21.75
   Exercised             (649,205)   $ 3.83-$18.75    (506,150)    $ 3.83-$17.38
   Cancelled             (122,770)                     (82,760)
                      ------------                   ----------
Outstanding-ending      4,710,100    $ 5.00-$27.25   4,133,840     $ 3.83-$24.75
                      ============                   ==========

Exercisable options     1,708,047    $ 5.00-$24.75   1,361,688     $ 3.83-$18.50
                      ============                   ==========

6.   Basic net income per common share is computed by dividing net income by the
     weighted average number of shares outstanding  during each period.  Diluted
     net income per common  share gives  effect to all  securities  representing
     potential  common  shares that were  dilutive  and  outstanding  during the
     period.  In the  calculation  of diluted net income per common  share,  the
     denominator includes the number of additional common shares that would have
     been  outstanding  if the  Company's  outstanding  stock  options  had been
     exercised.

     On November 5, 1999, the company  announced that the Board of Directors had
     authorized the purchase of up to 5,000,000 shares of its outstanding Common
     Stock from time to time as market conditions  warrant.  As of June 2, 2001,
     the Company had purchased in the open market, 2,148,000 shares at a cost of
     $33,611,352.  No shares were purchased during the three quarters ended June
     2, 2001.

     The  following  table sets forth the  computation  of basic and diluted net
     income per common share:



                                       -7-`

`Quarter Ended
                                                 -------------------------------
                                                       June 2,        May 27,
                                                        2001           2000
                                                 --------------- ---------------
Basic Net Income Per Share:

Net Income                                           $ 53,488,976   $ 50,130,922
                                                     ============   ============
Weighted Average Number of Shares
   Outstanding                                        171,740,023    171,133,686
                                                      ===========    ===========

Net Income Per Common Share - Basic                  $        .31   $        .29
                                                     ============   ============

Diluted Net Income Per Share:

Net Income                                           $ 53,488,976   $ 50,130,922
                                                     ============   ============

Weighted Average Number of Shares
   Outstanding                                        171,740,023    171,133,686

Effect of Dilutive Securities -
   Stock Options                                        1,288,542        976,757
                                                        ---------        -------
Average Shares - Diluted                              173,028,565    172,110,443
                                                      ===========    ===========

Net Income Per Common Share - Diluted                $        .31   $        .29
                                                     ============   ============



                                                        Three Quarters Ended
                                                 -------------------------------
                                                       June 2,        May 27,
                                                        2001           2000
                                                 --------------- ---------------

Basic Net Income Per Share:

Net Income                                           $155,404,742   $141,695,055
                                                     ============   ============

Weighted Average Number of Shares
   Outstanding                                        171,458,708    171,873,775
                                                      ===========    ===========

Net Income Per Common Share - Basic                  $        .91   $        .82
                                                     ============   ============

Diluted Net Income Per Share:

Net Income                                           $155,404,742   $141,695,055
                                                     ============   ============
Weighted Average Number of Shares
   Outstanding                                        171,458,708    171,873,775

Effect of Dilutive Securities -
    Stock Options                                       1,156,905      1,004,312
                                                        ---------      ---------
Average Shares - Diluted                              172,615,613    172,878,087
                                                      ===========    ===========

Net Income Per Common Share - Diluted                $        .90   $        .82
                                                     ============   ============



                                       -8-`

`MANAGEMENT'S DISCUSSION AND ANALYSIS
                OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Financial Condition

     At June 2, 2001,  the Company had working  capital of $410.2  million  with
cash and cash  equivalents  of  approximately  $37.7 million and no  outstanding
borrowings.  Operating activities generated cash of approximately $133.2 million
during the first  three  quarters of fiscal  2001  versus  approximately  $159.6
million  during the first  three  quarters  of fiscal  2000.  Changes in working
capital and cash and cash equivalents in fiscal 2001 and 2000 were primarily the
result of earnings,  capital  expenditures,  and changes in the flow of seasonal
merchandise.  The Company  annually  builds  inventory for the December  holiday
season.  On a relative  basis,  approximately  $60  million of this build up for
December 1999 occurred  prior to the start of fiscal 2000,  whereas most of this
increase  for  December  2000  occurred  after the start of  fiscal  2001.  This
inventory flow difference  increased  operating cash flow during the first three
quarters  of  fiscal  2000   compared  to  the  same  period  in  fiscal   2001.
Notwithstanding  seasonal  flows,  the  Company  has been  experiencing  gradual
inventory increases due to additional stores and distribution centers.
     Capital  expenditures  for the three  quarters  ended  June 2,  2001,  were
approximately  $120.2 million,  and are currently  expected to be  approximately
$165 to $175 million for fiscal 2001. The majority of capital  expenditures  for
fiscal  2001  is  related  to  the  Company's  new  store  expansion,  including
construction  of an  increased  number  of  stores;  existing  store  expansion,
relocation  and  renovation;   and  to  the  start  of  construction  of  a  new
full-service  distribution center in Maquoketa,  Iowa in the spring of 2001. The
new  store   expansion  will  require   additional   investment  in  merchandise
inventories.  In fiscal  2001,  the Company  expects to open  approximately  500
stores and close approximately 50 stores for a net addition of approximately 450
stores,  compared  with the opening of 406 stores and closing of 41 stores for a
net addition of 365 stores in fiscal 2000. The Company also  currently  plans to
expand or  relocate  approximately  200 stores and  renovate  approximately  200
stores in fiscal 2001,  compared  with the expansion or relocation of 153 stores
and  renovation  of 125 stores in fiscal  2000.  In the first three  quarters of
fiscal  2001,  the  Company  opened 380  stores,  closed 40 stores,  expanded or
relocated  156 stores and  renovated  134 stores.  In fiscal  2002,  the Company
currently plans to open approximately 525 new stores, and close approximately 50
stores,  expand or  relocate  150 to 200  stores  and  continue  its  program of
renovating  stores.  The Company  occupies  most of its stores  under  operating
leases. Store opening, closing, expansion,  relocation, and renovation plans, as
well as overall capital  expenditure  plans, are  continuously  reviewed and are
subject to change.
     On November 5, 1999, the Company  announced that the Board of Directors had
authorized  the purchase of up to  5,000,000  shares of its  outstanding  Common
Stock from time to time as market  conditions  warrant.  As of June 2, 2001, the
Company  had  purchased  in the  open  market,  2,148,000  shares  at a cost  of
$33,611,352. No shares were purchased during the first three quarters ended June
2, 2001.



                                       -9-`

`Results of Operations
Net sales

     Net sales  increased  15.1% in the quarter  ended June 2, 2001, as compared
with the quarter ended May 27, 2000,  and increased  17.1% in the three quarters
ended June 2, 2001, as compared with the three  quarters ended May 27, 2000. The
calendar  followed by the Company and most retailers  included a non-comparative
fifth week in January  resulting in an extra week in this year's second quarter.
Sales for the  fifth  week in  January  were  approximately  $66.5  million.  In
addition to the extra week in this year's second  quarter,  the  increases  were
attributable  to  increased  sales in existing  stores and sales from new stores
opened as part of the Company's store expansion program.
     Sales in existing stores  increased 3.6% in the quarter ended June 2, 2001,
above  the  comparable  period  in  fiscal  2000,  with the  sales of  hardlines
merchandise increasing approximately 8.5% and the sales of softlines merchandise
decreasing  approximately  10.2%. Sales in existing stores increased 3.4% in the
three quarters ended June 2, 2001,  above the comparable  period in fiscal 2000,
with sales of hardlines merchandise  increasing  approximately 8.0% and sales of
softlines merchandise  decreasing  approximately 8.2%. Hardlines as a percentage
of total sales increased to approximately  73.7 % in the third quarter of fiscal
2001 compared to  approximately  70.1% in the third quarter of fiscal 2000,  and
increased  to  approximately  74.7% in the first  three  quarters of fiscal 2001
compared  to  approximately  71.5% in the first three  quarters of fiscal  2000.
Softlines as a percentage  of sales  decreased to 26.3% in the third  quarter of
fiscal 2001 (with hanging apparel and shoes  representing  14.8%,  basic apparel
4.5% and domestics  7.0%)  compared to 29.9% in the third quarter of fiscal 2000
(with  hanging  apparel and shoes  representing  17.4%,  basic  apparel 5.2% and
domestics  7.3%).  Softlines as a percentage of sales  decreased to 25.3% in the
first three quarters of fiscal 2001 (with hanging apparel and shoes representing
13.1%,  basic  apparel 4.9% and domestics  7.3%)  compared to 28.5% in the first
three  quarters of fiscal  2000 (with  hanging  apparel  and shoes  representing
15.4%,  basic apparel 5.5% and domestics 7.6%). The space  reallocation  program
completed  in all  stores  in  October  2000  dedicated  more  selling  space to
hardlines,  including name brand, basic consumable merchandise and reduced space
for hanging  apparel by  approximately  15% to 20%.  The  Company  also plans to
reallocate space from its shoe department to hardlines, and expects the shift in
the merchandise mix to hardlines to continue into fiscal 2002.
     Hardlines  merchandise  includes  primarily  household  chemical  and paper
products,  health and beauty  aids,  candy,  snack and other food,  electronics,
housewares  and  giftware,  toys,  school  supplies,  hardware,  and  automotive
supplies.  Softlines  merchandise  includes men's,  women's,  boy's,  girl's and
infant's  clothing and accessories,  shoes, and domestic items such as blankets,
sheets and towels.
     The  sales  increases  for the first  three  quarters  of fiscal  2001 were
achieved despite the elimination of advertising  circulars distributed last year
in the first quarter and third  quarter.  This  adversely  impacted sales in the
first and third quarters but produced


                                      -10-



Net sales continued from page 10

expense savings and reduced the number of advertising  circulars  distributed by
the Company  this fiscal year to three.  For the fourth  quarter of fiscal 2001,
the Company's current plan is for sales in existing stores to increase in the 3%
to 5% range.
     The average number of stores open during the first three quarters of fiscal
2001 was 12.8% more than during the first three  quarters  of fiscal  2000.  The
Company had 4,029 stores in operation  at June 2, 2001,  as compared  with 3,542
stores in operation at May 27, 2000,  representing an increase of  approximately
13.7%.

Cost of sales

     Cost of sales  increased  15.3%  in the  quarter  ended  June 2,  2001,  as
compared with the quarter ended May 27, 2000,  and increased  17.6% in the three
quarters  ended June 2, 2001,  as compared to the three  quarters  ended May 27,
2000.  These increases  primarily  reflected the additional sales volume between
years. Cost of sales, as percentage of net sales, was 64.8% in the quarter ended
June 2, 2001, compared to 64.7% in the quarter ended May 27, 2000, and was 65.9%
in the three  quarters  ended  June 2,  2001,  compared  with 65.7% in the three
quarters ended May 27, 2000. The increases in the cost of sales  percentages for
the quarter and first three  quarters of fiscal 2001 were due  primarily  to the
adverse margin impact of increased sales of basic consumables and lower sales of
apparel and seasonal merchandise,  partially offset by fewer markdowns. The cost
of sales percentage in the fourth quarter of fiscal 2001 is expected to continue
to increase  slightly compared to the percentage in the fourth quarter of fiscal
2000.  The cost of  sales  percentages  also  are  affected  by  changes  in the
effectiveness of merchandise  purchasing  programs and by changes in merchandise
shrinkage losses and freight costs.

Selling, general and administrative expenses

     Selling, general and administrative expenses increased 18.0% in the quarter
ended  June  2,2001,  as  compared  with the  quarter  ended May 27,  2000,  and
increased  18.9% in the three  quarters ended June 2, 2001, as compared with the
three  quarters  ended May 27, 2000.  The  increases in these  expenses were due
primarily to additional costs arising from the continued growth in the number of
stores in operation and to the extra week of  operations  included in the second
quarter of fiscal  2001.  Selling,  general and  administrative  expenses,  as a
percentage  of net sales,  were  25.7% in the  quarter  ended  June 2, 2001,  as
compared  with 25.1% in the quarter  ended May 27,  2000,  and were 25.2% in the
three  quarters ended June 2, 2001, as compared with 24.8% in the three quarters
ended May 27, 2000.  The increase in the  percentages  for the quarter and three
quarters  ended June 2, 2001 were due primarily to the  significant  increase in
the number of new store openings,  additional costs related to the completion of
the space reallocation program in


                                      -11-

Selling, general and administrative expenses (cont. from page 11)

existing  stores and to increases in occupancy  costs  (utilities  and rent) and
health care costs in excess of sales increases. These costs more than offset the
savings from the elimination of the advertising circulars in the first and third
quarters  and the  expense  leverage  from the extra week of sales in the second
quarter.
     Based on the  current  plan for sales in  existing  stores  for the  fourth
quarter of fiscal  2001,  selling,  general  and  administrative  expenses  as a
percentage  of net sales are  expected  to  increase  slightly  compared  to the
percentage in the fourth quarter of fiscal 2000.

Provision for taxes on income

     The effective  tax rate was 36.5% for the quarter and first three  quarters
ended June 2, 2001 and May 27, 2000.

Forward-Looking Statements

     Certain  statements  contained herein and elsewhere in this Form 10-Q which
are not historical  facts are  forward-looking  statements  made pursuant to the
safe harbor provisions of the Private Securities  Litigation Reform Act of 1995.
These  forward-looking  statements address the Company's plans and activities or
events which the Company  expects  will or may occur in the future.  A number of
important  factors could cause actual  results to differ  materially  from those
expressed in any forward-looking  statements.  Such factors include, but are not
limited  to,  competitive  factors  and  pricing  pressures,   general  economic
conditions,  changes in consumer demand and product mix, inflation,  merchandise
supply constraints,  general transportation delays or interruptions,  dependence
on imports,  changes in currency  exchange  rates,  tariffs,  quotas and freight
rates,  availability of real estate,  costs and delays associated with building,
opening  and  operating  new  distribution  facilities  and  stores,  costs  and
potential  problems  associated  with  the  implementation  of new  systems  and
technology,  including supply chain systems and electronic commerce,  changes in
energy prices and the impact on consumer  spending and the Company's  costs, and
the  effects  of   legislation   on  wage  levels  and   entitlement   programs.
Consequently,  all of the forward-looking statements made are qualified by these
and other factors,  risks and  uncertainties.  The Company does not undertake to
publicly update or revise its  forward-looking  statements even if experience or
future changes make it clear that projected results expressed or implied in such
statements will not be realized.



                                      -12-`

`PART II - OTHER INFORMATION


Item 6. Exhibits and Reports on Form 8-K

        (a)      Exhibits filed herewith:

                 10 Amended and Restated Credit Agreement dated as
                    of May 31, 2001, between Family Dollar Stores, Inc.
                    and Family Dollar, Inc., as Borrower, and
                    Bank of America, N.A.

                 11 Statements Re: Computations of Per Share Earnings


        (b)      Reports on Form 8-K - None


SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                         FAMILY DOLLAR STORES, INC.
                                     --------------------------------
                                               (Registrant)


Date: July 2, 2001                   /s/ R. James Kelly
-------------------                  --------------------------------
                                         R. JAMES KELLY
                                         Vice Chairman


Date: July 2, 2001                   /s/ C. Martin Sowers
-------------------                  --------------------------------
                                         C. MARTIN SOWERS
                                         Senior Vice President-Finance



                                      -13-`