Fred’s Posts Q4, Fiscal Year Improvements

For the 13-week fourth quarter ended January 30, Fred’s posted a loss of $3.9 million, or 11 cents per share, versus a loss of $8.2 million, or 22 cents per share, in last year’s fourth quarter.

On an adjusted basis, excluding non-operational items, the company posted earnings of $2.4 million, or seven cents per share, versus $700,000, or two cents per share, in the fiscal 2014 quarter.

Fred’s beat an analyst average estimate published by MarketBeat by two cents per share.

Comparable store sales increased 1.7% for the quarter year over year, Fred’s reported. Net sales were $554.6 million versus $504.4 million in the year-earlier quarter. Operating loss was $5.1 million versus $15.7 million in the period a year earlier.

For the full fiscal year, net loss was $7.4 million, or 20 cents per share, versus $28.9 million, or 80 cents per share, in the year prior. Adjusted earnings were $3.4 million, or nine cents per share, versus a loss of $7.3 million, or 20 cents per share, in fiscal 2014.

Comps for the fiscal year increased 1.5% year over year, Fred’s noted. Net sales were $2.15 billion versus $1.97 billion in the 2014 fiscal year. Operating loss was $10.4 million versus $48.4 million in the period a year earlier.

“Fred’s financial performance for the fourth quarter, from the top line through adjusted earnings, reflected increasing momentum of significant improvements that we have made throughout our company over the course of the past year,” said Jerry Shore, Fred’s CEO. “We were very pleased with the total sales increase, which was driven by the growth in specialty pharmacy, the success of our holiday seasonal programs and expanded assortments. The team refocused merchandising for the holiday period, which was well received by our customers. With improved supply chain efficiency, merchandise was in the stores earlier to ensure that our customers knew that Fred’s was in the holiday business in 2015. An enhanced merchandising plan was communicated to the stores, which improved our operators’ ability to execute. All of this was supported by a stronger marketing effort.”

Shore added, “Another area of improvement during the fourth quarter and year was increased leverage of selling, general and administrative expenses. In the fourth quarter, total expenses on an operating basis declined from last year’s level, while sales increased 10%. Our team has implemented strong cost controls in areas such as store occupancy costs, supply chain productivity and pharmacy, where we reduced the cost to fill prescriptions.”

Fred’s operates 659 discount general merchandise stores and three specialty pharmacy-only locations in 15 states in the southeastern United States.