Dollar General Corp posted higher quarterly profit on Tuesday and remained cautious for the rest of the year despite an encouraging start to the holiday season, as customer confidence and spending were under pressure and it faced challenges from competing discount chains.

Profit rose to $207.7 million, or 62 cents per share, in the fiscal third quarter ended November 2, from $171.2 million, or 50 cents, a year earlier.

Sales increased 10.3 percent to $3.96 billion. Sales at stores open at least a year, or same-store sales, rose 4 percent.

Dollar General, which prices most of its merchandise below $10, generally does well when economic concerns such as high unemployment and rising food prices push those on limited budgets to cut spending.

(Reporting by Jessica Wohl in Chicago; Editing by Jeffrey Benkoe)