Fred's, Inc. (NASDAQ: FRED) today reported financial results for the third quarter and nine months ended October 27, 2012.
For the third quarter ended October 27, 2012, Fred's net income totaled $6.6 million or $0.18 per diluted share compared with net income of $9.0 million or $0.24 per diluted share in the year-earlier period. As previously announced, the decline in net income for the quarter reflected the impact of a shift in layaway sales, unfavorable LIFO expense charges in the quarter and higher operating expenses. Fred's net income for the first nine months of 2012 totaled $23.1 million or $0.63 per diluted share compared with $23.6 million or $0.61 per diluted share in the prior year.
Fred's total sales for the third quarter of fiscal 2012 increased 1% to $450.6 million from $444.4 million for the same period last year. Comparable store sales for the quarter declined 2.5% compared with an increase of 1.5% in the third quarter last year. Fred's total sales for the first nine months of fiscal 2012 increased 3% to $1.422 billion from $1.381 billion for the same period last year. Comparable store sales for the first nine months of 2012 decreased 0.8% compared with a 0.7% increase for the same period last year.
Commenting on the results, Bruce A. Efird, Chief Executive Officer, said, "We were gratified to see general merchandise sales and traffic improve during the final month of the quarter in response to our increased marketing initiatives. The third quarter reflected the intensely challenging retail climate we face and the effects of the brand-to-generic shift on pharmacy sales throughout the quarter. Despite this negative impact on top-line sales, our pharmacy department produced strong results for the quarter, with growth in comparable prescription counts and increased gross margins.
"Management supports the Board's decision to issue a special dividend payable in December, which recognizes the quality and strength of our balance sheet and cash flows," Efird continued. "Our stores are ready and well stocked and our merchandising and marketing plans are in place to deliver great values for our customers in the holiday season ahead. In short, we believe Fred's remains well positioned for a solid finish to 2012, and that the Company will continue to generate momentum in the upcoming fiscal year."