Fred’s profit surges in 3Q

-- Home Textiles Today, 11/26/2008 9:44:00 AM

Memphis – Fred’s today reported a 32% jump in net income for the third quarter, with earnings of $6.1 million, or 15 cents per share.

Sales for the quarter ended Nov. 1 were essentially flat -- $418.0 million, down 0.4%, owing to the closing earlier this year of 75 stores and 22 pharmacies. Comps rose 1.4%.

Even though home in general is considered a discretionary category at Fred's and one that has been down-trending during the soft economy, some home textiles aspects have remained resilient into the fourth quarter. Executives sheets and towels continue to perform well, but singling out room-size rugs and bath accessories a products that are selling less well.

“We continue to benefit from the implementation of our strategic plan, built on sales and operational initiatives to drive traffic, control expenses and close underperforming stores, this year,” said Michael Hayes, ceo. “Together, these steps have helped extend a positive trend in operating performance throughout the company, underscored by greater expense leverage, higher inventory turnover and improved cash flow.”

Looking ahead, Fred’s expects sales to fall 2% to 4%, again reflecting the store closings. Comps are expected to be flat. Earnings per share are forecasted to be in the range of 17 to 21 cents vs. a loss of 11 cents in last year’s fourth quarter.