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At a time when many retailers are watching sales drop and closing stores or cutting back on expansion plans, the nation's largest dollar store chains are reporting sales gains. They are adding units, often as tenants in malls that are eager to fill space at lowered rent rates.

For the opening quarter of this year, Dollar General reported a 13.3 percent increase in sales at stores open a year or more. This followed a 5.4 percent gain in the final quarter of 2008. Traffic and the size of the average transaction have also risen. Gains occurred in all four of the chain's merchandise categories. Consumables led the way with a 18.7 percent rise in this year's first quarter. They represented 71.8 percent of total sales and reached $1.2 billion. Sales of seasonal products posted a 10.7 percent hike. Home product sales were up 6.1 percent for the quarter, and basic apparel sales rose 7.6 percent.

"Our loyal customers are shopping with us more often, and we believe we are also attracting new customers," said Rick Dreiling, chairman and CEO of the chain, based in Goodlettsville, TN. It opened 104 new stores during the first quarter and closed four. As of May 1, there were 8,462 units in the chain, an increase of 197 since the same time the previous year.

Sales at Family Dollar stores open for at least a year rose 6.4 percent in this year's first quarter, compared with a year ago. Family Dollar Stores Inc., based in Matthews, NC, also reported increases in traffic and in the average sales ticket. It operates more than 6,600 stores and plans to open 200 this year.

Sales at Dollar Tree, which has around 3,600 stores, rose 2.2 percent in this year's first quarter. The company, based in Chesapeake, VA, experimented with selling some items at some of its stores for more than $1, but corrected course and returned to the dollar only model.

Dollar stores are becoming increasingly popular with middle and upper class consumers, according to a recent analysis from The Nielsen Company. The report shows that dollar stores are outpacing other retail channels among shoppers of all income levels. According to the analysis, shoppers with an annual household income of more than $100,000 reported an 18 percent increase in spending at dollar stores in the second half of 2008 from a year earlier. That represents a bigger gain than at mass market discount chains, such as Walmart and at warehouse clubs, said Nielsen.

Nearly half of all U.S. households shop at dollar stores each month, up from 36 percent in 2002, according to Retail Forward, a research firm in Columbus, OH.

Article ID: 1164