MEMPHIS, Tenn. (AP) â¿¿ Discount-store operator Fred's Inc. said Tuesday its third-quarter profit rose 16 percent, boosted by strong customer traffic and cost cutting. The results beat Wall Street expectations and Fred's shares rose almost 3 percent in morning trading. Fred's has increased sales incentives and other inducements to get shoppers into stores despite the uncertain economy and continued high unemployment. "Highlights of the third quarter included strong customer traffic, higher gross margins in our general merchandise and pharmacy departments, and well as improved management of controllable operating costs," said CEO Bruce A. Efird in a statement. Net income for the quarter ended Oct. 29 rose to $9 million, or 24 cents per share, from $7.8 million, or 20 cents per share, a year ago. Revenue rose 2 percent to $444.4 million from $435 million last year. Analysts expected 22 cents per share on revenue of $446.5 million according to a FactSet poll. Revenue in stores open at least one year rose 1.5 percent. The measure is considered a key gauge of a retailer's fiscal health because it excludes stores that open or close during the year. Fred's operates 683 stores, including 22 franchised stores, in the southeastern United States. In the fourth quarter, Fred's expects net income of 23 cents to 27 cents per share. It expects revenue to rise 2 percent to 4 percent, implying revenue of $495.3 million to $505.02 million. Analysts expect net income of 24 cents per share on revenue of $498.5 million. For the year, the company increased the lower end of its guidance. It now expects net income of 84 cents to 88 cents per share, up from prior guidance of 83 cents to 88 cents per share. Analysts expected 83 cents per share. Shares rose 35 cents, or 2.9 percent, to $12.59 in morning trading. The stock has fallen 11 percent since the beginning of the year.