Q3 Tough On Fred’s As Comps Decline

Fred’s, Inc. has posted financial results for the third quarter ended October 27, with net income coming in at $6.6 million, or 18 cents per diluted share, versus net income of $9 million, or 24 cents per diluted share, in the year-earlier period. Total sales for the third quarter gained 1%, the retailer said, to $450.6 million, but comparable store sales declined 2.5%.

Financial analysts surveyed by Thomson Reuters, on average, expected the company to report earnings of 20 cents per share on revenues of $452.3 million for the quarter.

Fred’s stated that the net income decline in the quarter reflected the impact of a shift in layaway sales, unfavorable LIFO expense charges and higher operating expenses.

Operating income slid to $10.1 million from $ 13.6 million in last year’s third quarter.

Bruce Efird, Fred’s CEO, said in comments on the quarterly results, “We were gratified to see general merchandise sales and traffic improve during the final month of the quarter in response to our increased marketing initiatives. The third quarter reflected the intensely challenging retail climate we face and the effects of the brand-to-generic shift on pharmacy sales throughout the quarter. Despite this negative impact on top-line sales, our pharmacy department produced strong results for the quarter, with growth in comparable prescription counts and increased gross margins. Our stores are ready and well stocked, and our merchandising and marketing plans are in place to deliver great values for our customers in the holiday season ahead.”

Fred’s operates 708 discount general merchandise stores, including 21 franchised properties, in the southeastern United States.