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Fred's Posts 4Q Profit On Fewer Charges

The Associated Press

MEMPHIS, Tenn. (AP) — The retailer Fred's Inc. reported a profit Thursday for its fourth quarter, benefiting from fewer charges than a year ago.

The discount retailer and pharmacy chain, which is in the midst of a restructuring and recently named a new chief executive, also provided a first-quarter earnings outlook in range of analysts' estimates.

Fred's earned $2.3 million, or 6 cents per share, in the three months ended Jan. 31. That compares with a loss of $4.4 million, or 11 cents per share, a year earlier.

Quarterly results included 14 cents per share in charges related to legal settlements as well as store and pharmacy closings. The prior-year period had 25 cents per share in charges for the start up of the store closing effort.

Excluding the charges, net income was $7.8 million, or 20 cents per share.

Analysts forecast profit of 22 cents per share, according to a Thomson Reuters survey. Analysts' estimates typically exclude one-time items.

Sales dropped 5 percent to $469.4 million from $494.1 million a year ago, mostly due to store closings. The results missed Wall Street's estimate of $472.5 million.

Fred's closed 74 stores and 23 pharmacies in 2008, while opening 21 stores and 11 pharmacies.

The closings also impacted same-store sales, which dipped 1.1 percent during the quarter.

Same-store sales, or sales at stores open at least a year, are a key indicator of retailer performance since they measure growth at existing stores while excluding sales at newly opened ones.

Aside from the closings, Chairman Michael J. Hayes said in a statement that deteriorating economic conditions and eroding consumer confidence also led shoppers to tighten spending during the holidays more than expected.

For the year, earnings surged 55 percent to $16.6 million, or 42 cents per share, from $10.7 million, or 27 cents per share. Annual revenue rose to $1.8 billion from $1.78 billion in the previous year.

Despite the consumer spending cutback, Fred's anticipates first-quarter profit in the range of Wall Street's expectations. The company forecast earnings of 19 cents to 21 cents per share. Analysts predict profit of 20 cents per share.

Fred's operated 663 discount stores at the end of the year.