Fred's net income jumps 55% in 3Q
HTT Staff -- Home Textiles Today, 11/23/2010 10:59:11 AM
Memphis, Tenn. - Fred's Inc. attributed its 55% jump in net income and more modest gains in sales and comps during the third quarter mainly to the ongoing improvements it has been making in its stores, including better merchandise mixes and presentation.
Third quarter net income was $7.8 million, or 20 cents per share, compared with $5.0 million, or 13 cents per share, in the year-earlier period. Total sales grew by 3% to $435.0 million from $422.4 million, and comparable store sales increased 1.5% versus last year's 1.0% gain.
"[The] higher earnings reflect the ongoing changes we have implemented to drive customer traffic and margin expansion, with an emphasis on our Core 5 program, an upgraded merchandise assortment, and enhancements to the look of the stores - all designed to build market share," explained Bruce Efird, ceo, during the company's quarterly call this morning. "Fred's major initiative to remodel and upgrade 200 stores in 2010 remains on track, with 190 stores completed through October."
Year-to-date results included: an 18% increase in net income to $21.0 million, or 54 cents per share; a 3% increase in sales to $1.356 billion; and comps up 2.1% on top of an increase of 0.8% in the first nine months of 2009.
In the third quarter, Fred's opened five pharmacy locations and closed seven stores and three pharmacy locations. Additionally, the company refreshed 70 stores with its new "Core 5" elements. Year to date, Fred's opened four stores and 20 pharmacy locations, closed seven stores and 12 pharmacy locations, and refreshed 190 stores with Core 5 elements.
The Southeastern, 672-unit discount chain said 3Q results have it feeling positive about the holiday selling season.
"Although high unemployment and a very competitive sales environment continue across our markets, we enter the fourth quarter optimistic about our earnings estimates for the quarter," Efird continued.
The company has the following expectations for its fourth quarter:
- Total sales to increase 3% to 4%;
- Comparable store sales to increase 2% to 4% versus a decrease of 0.9% in the fourth quarter last year;
- Earnings per diluted share to increase 33% to 60% to a range of 20 to 24 cents per share compared with 15 cents in the same period last year;
- EOS in the range of 74 to 78 cents, representing an increase of 25% to 32% over last year.
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