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Fred's Inc. Sees Comps and Traffic Increase in 2Q

MEMPHIS, TENN. - Southeastern regional discount chain Fred's Inc. benefitted from "several solid accomplishments" in its comparable store sales growth and increased traffic, both in the second quarter and the year to date.
     Sales for the second quarter, ended July 31, increased 4% to $449.5 million from $434.2 million for the same period last year. Comparable store sales increased 2.5% compared with a decrease of 1.3% in the second quarter last year.
     The 674-unit retailer's net income jumped 17% to $5.0 million or 13 cents per share compared with net income of $4.2 million or 11 cents per share in the year-earlier period.
    For the six months, sales increased 3% to $921.1 million from $892.6 million for the same period last year. Comparable store sales increased 2.4% on top of an increase of 0.8% in the first half of 2009.
     Net income rose 2.3% to $13.1 million or 34 cents per share compared with net income of $12.8 million or 32 cents per = share in the year-earlier period.
     The role of the joint apparel and linens business remained essentially unchanged over the two periods. In the quarter, apparel and linens accounted for 7.2% of sales compare with 7.8% in the 2009 second quarter. For the year to date, apparel and linens made up 7.5% of total sales versus 7.8% in the first half of last year.
      General merchandise - home in particular - is increasing in relevance, creating "a healthier, more profitable mix of sales," said Bruce A. Efird, ceo.
     Expected to further boost Fred's financial performance going forward is the company's current store-upgrade effort, which includes improvements in home-related goods.
     "The implementation of our Core 5 program to upgrade our stores remains on plan and continues to deliver the expected positive results," he said. "While our general merchandise departments are building traction, our pharmacy department is now feeling the impact of industry headwinds, in spite of Fred's achieving above-industry comparable script growth."
     Fred's Inc. expects the momentum to continue in the back half of this year, "and we remain confident in the company's forecast for 2010 financial performance," he added
     In the third quarter, Fred's expects sales to increase 4% to 5% and comps to grow 2.0% to 4.0. Earnings per share are anticipated to range from 16 cents to 19 cents for the period versus earnings per share of 13 cents a year ago.
     Based on that outlook, the company continues to expect full year EPS in the range of 72 cents to 79 cents.

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