Fred's Not Happy for Holiday

Memphis, Tenn. — Fred's stumbled in the third quarter; its earnings fell by 6% to $6 million vs. $6.3 million during the year-ago period. The culprit: October. Following several months of steady sales and comp gains, lower-than-expected October growth arrived against comparisons to a period last year when aid to the hurricane-stricken Southeast help propel Fred's results. Although third quarter sales rose 8% to $407.9 million, they missed Wall Street's target by $6 million. Comps rose 3%.

Fred's cash-strapped customer — whose average transaction during the quarter rang up at $18.04 — is not expected to be in good shape going into holiday, ceo Michael Hayes said.

Should Congress pass a minimum wage increase, Fred's should benefit from it despite short-term impact on its own payroll, executives said. "Our 2007 projection will probably be more positive than some might expect," Hayes said.