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Memphis – As expected, the third quarter proved challenging for Fred’s Inc. as the retailer cleared inventory, cut receipts of overstock high-margin products, and reduced price points in line with competitors, among other efforts to improve its performance.
Jerry A. Shore, ceo, also cited recently revamped ad programs implemented to help drive traffic as another initiative.
“Overall, inventory was down 9% at the end of the quarter, with general merchandise inventory down 11% on a per-store basis,” he said. “These reductions highlight the success of the programs implemented during the year.”
For the third quarter ended November 1, Fred’s suffered a net loss of $10.4 million, or ($0.28) per diluted share, compared with net income of $7.3 million, or $0.20 per share in the year-ago period.
Better off were total sales, which were up 3% to $476.2 million from $460.5 million, and comps with a 0.3% increase on top of an increase of 1.4% for the year-earlier period.
Year to date, Fred’s reported a net loss of $20.8 million, or ($0.56) per diluted share, versus net income of $22.0 million, or $0.60 per share, in the prior year.
Total sales for the first nine months grew 2% to $1.466 billion compared with $1.444 billion, but comps decreased 0.5% compared with an increase of 1.1% in the same period last year.
During the quarter, the company closed five stores, and expects to shut down another 47 sites in the fourth quarter as part of Fred’s larger plans to close stores not meeting its operational performance targets.
Looking ahead, Fred’s pharmacy segment is proving a driver of sales and traffic.
Shore noted the pharmacy department’s inventory “was in line with pharmacy revenue growth and matched our expectations,” and its sales increased 13% during the third quarter and represented 44% of Fred’s total sales mix in the period.
In the fourth quarter of 2014, Fred’s expects total sales to increase in the range of 4% to 6%, comps to be flat to up 2.0% and net loss per diluted share of $0.08 to $0.12 compared with earnings per diluted share of $0.11 in the fourth quarter last year.
“With the new year only months away, we remain confident in our ability to achieve our 2015 financial goals as we now have pharmacy momentum, positive test results from our convenience model and an upgrade in executive talent, which includes our sourcing team now in place, our new GMM, Craig Barnes, and the prospects of a new president and coo in place before fiscal 2015,” Shore summed.
