Fred’s posted a steep loss in its third quarter, as the retailer was impacted by charges related to inventory and store closings.
In the third quarter ended October 29, when it absorbed a 78 cents per share one-time charge, Fred’s recorded a net loss totaling $38.4 million, or $1.05 per share, versus net income of $1.4 million, or four cents per share, for the period a year prior.
The charge, totaling $38 million, or 78 cents per share after tax, primarily related to inventory write-downs, the company reported, as well as the closing of 40 stores scheduled to occur in the first half of 2017. The resulting 27 cent loss per share was deeper than the MarketBeat-published analyst average estimate of a 17 cents loss per share.
Net income in the 2015 third quarter included expenses totaling $2.8 million on a pretax basis, or five cents per share after tax, for estimated claims against the company related to a data security breach and $1.6 million on a pretax basis, or three cents per share after tax, for consulting fees and other non-recurring charges.
Comparable store sales for the third quarter declined 3.8%, while net sales for the quarter slipped 4.5% year over year to $516.6 million. Operating loss was $44.1 million versus operating income of $2.4 million in the 2015 quarter.
“We continue to address and improve several key areas of our business, including a heightened focus on positioning Fred’s as a leading health care-focused company,” said Michael Bloom, Fred’s CEO. “These ongoing initiatives are designed to strengthen all aspects of our operations as we seek to create a more dynamic platform to grow our business while maximizing returns on invested capital and, in turn, shareholder value. We look forward to providing additional updates in the months and quarters ahead.”
Fred’s operates 647 discount general merchandise stores and three specialty pharmacy-only locations in the southeastern United States.