By Nicole Maestri

NEW YORK (Reuters) - Family Dollar Stores Inc (FDO.N: Quote, Profile, Research) reported a 30 percent drop in quarterly profit on Friday as cash-strapped shoppers limited their discretionary purchases, and the discount retailer once again cut its full-year earnings forecast.

Family Dollar, which prices most of its merchandise below $10, also said it now expects sales at stores open at least a year, a key retail gauge known as comparable store sales, to fall 4 to 5 percent in March. That is a steeper decline than its previous view for a drop of 2 to 4 percent.

"Our customers continue to react to the current economic environment by limiting their discretionary spending," said Howard Levine, chairman and chief executive, in a statement.

Net income fell to $63.3 million, or 45 cents per share, for the fiscal second quarter, ended March 1, from $90.5 million, or 60 cents per share, a year ago.

Analysts, on average, were expecting it to earn 42 cents per share, according to Reuters Estimates. In January, Family Dollar had forecast per-share earnings of 40 to 44 cents for the period, which at the time was below analysts' average estimate of 57 cents.

"Deteriorating economic conditions resulted in softer-than-expected sales in discretionary categories, which constrained revenue growth and pressured gross margin more than we had planned," said Chief Financial Officer Kenneth Smith on a conference call with analysts.

Sales declined 6 percent to $1.83 billion in the quarter, which contained one fewer week of sales than a year earlier.

In a research note, Goldman Sachs analyst Adrianne Shapira maintained her "neutral" rating on the stock, citing "continued uncertainty surrounding its low end consumer, declining traffic trends, increasing shrink and softer discretionary product sales."