Fred’s Inc. (FRED) reported 2.3% year-over-year decline in comparable-store sales (comps) in Nov 2014, in line with management’s expectations. It compared unfavorably from the year-ago period which reported flat comps due to weak retail environment and low consumer spending. Fred’s remained closed for the Thanksgiving Day on Nov 27, 2014. Excluding the impact of the closure, comps remained flat.
During the month, Fred’s opened two full-service stores and one Xpress location. It also closed two Xpress locations and two franchise outlets.
Total sales for November went up 2% to $154.3 million but failed to meet management’s expectation of 4% to 6% growth as general merchandise sales and traffic were affected by the warmer weather. Lower traffic at the company stores also led to a decline in net sales during the month.
Amid declining comps due to macroeconomic headwinds, the company has been able to deliver positive sales at its pharmacy department. In November too, Fred’s' pharmacy department performed well with comps and sales increasing year over year.
As of Nov 29, 2014, Fred’s operates 702 discount general merchandise stores, including 19 franchised Fred's stores, in the southeastern United States.
In the recently reported third-quarter fiscal 2014 ended Nov 1, 2014, Fred’s’ comps increased 0.3%, but was significantly lower than 1.4% rise in the year-ago period. Total third-quarter sales were $476.1 million, up 3.4% from the year-ago period. Sales, also, beat the Zacks Consensus Estimate of $469.0 million by 1.5%. Comparable store sales increased 0.3% lower than an increase of 1.4% in the year-ago period. However, loss of 16 cents was wider than the Zacks Consensus Estimate of a loss of 14 cents. The results also compared unfavorably with earnings of 20 cents reported a year ago as well as the company’s loss expectation range of 5 to 11 cents. Softer comps and weak margins resulted in the disappointing results. (Read: Fred's Posts Wider-than-Expected Q3 Loss on Weak Comps)
Fred’s currently carries a Zacks Rank #4 (Sell).
Stocks to Consider
Some better-ranked companies in the apparel industry include Dollar Tree Inc. (DLTR), Ross Stores Inc. (ROST) and Bebe Stores Inc. (BEBE). All these stocks carry a Zacks Rank #2 (Buy).
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