Fred's Slips To Loss In Q3 - Update

(RTTNews) - Discount retailer Fred's, Inc. (FRED) Tuesday reported a loss for the third quarter compared with profit last year, reflecting provisions to establish reserves for closed-store inventory as well as some non-recurring charges. Sales rose over 3 percent from last year.

Jerry Shore, chief executive officer said, "As we forecasted, the third quarter was difficult as we aggressively cleared inventory, cut receipts of overstocked high-margin product, brought prices in line with competitors, and revamped the ad programs to drive traffic."

For the quarter, net loss totaled $10.43 million or $0.28 per share, compared with a profit of $7.31 million or $0.20 per share in the prior year.

In a move to meet its operational performance targets, the company closed five stores in the third quarter and said it will close 47 stores in the fourth quarter.

The recent-quarter results included provisions to establish reserves for closed-store inventory and additional above-cost markdowns on low-productive inventory. These provisions totaled $0.10 per share.

In addition, the firm incurred non-recurring charges of $0.02 per share mainly related to settlement of certain state franchise and income tax obligations.

Excluding reserve impacts and non-operational charges, Fred's net loss for the quarter was $0.16 per share. On average, nine analysts polled by Thomson-Reuters estimated loss to be $0.13. Analysts' estimates typically exclude one-time items.

Net sales for the quarter rose 3.4 percent to $476.18 million from $460.54 million a year ago, while analysts expected $476.15 million.

Comparable store sales edged up 0.3 percent on top of an increase of 1.4 percent last year.

Looking ahead, for the fourth quarter, the company expects net loss of $0.08 to $0.12 per share and, on an adjusted basis, operational earnings to be flat to up $0.04 per share. Analysts are looking for earnings of $0.06 per share for the quarter.

Sales are expected to increase in the range of 4 to 6 percent. Comparable store sales are anticipated to rise from flat to up 2 percent.

FRED closed Tuesday's trading at $16.91, up 3.05 percent.