) fourth-quarter fiscal 2013 earnings of 17 cents exceeded both
the Zacks Consensus Estimate and year-ago results by 13.33%. The
fourth-quarter results also exceeded the company's expected range
of 13 to 16 cents. Management had lowered fourth-quarter earnings
outlook during its conference call for January same store sales
from 18 cents to 23 cents. Frequent boutique shutdowns due to
harsh weather in the last month of the quarter led to the
Revenues and Margin Performance
Total fourth-quarter sales slipped 7.2% to $495.1 million from
$533.4 million in the year-ago quarter. Sales missed the Zacks
Consensus Estimate of $500.0 million by 1%. The
lower-than-expected sales resulted from 120 full and partial
daily stores closings during January due to extreme weather.
Weather impacted sales negatively by 100 basis points (bps)
during the quarter. Excluding the effect of an extra week in the
comparable prior-year quarter, total sales inched up 0.5%.
Comparable store sales increased 0.1% versus a decline of 2.8%
in the year-ago period. Increase in average customer transaction
was partially offset by lower customer traffic during the
During the quarter, Fred's opened three stores, consisting
four full-service stores and four Xpress pharmacy locations. It,
however, closed four full-service stores and one Xpress pharmacy
Gross profits slipped 10% to $133.6 million and gross margin
shrank 90 basis bps to 27.0% from the year-ago quarter due to
higher merchandise markdowns. Merchandise markdowns were
negatively affected by continued sales mix shift toward
lower-margin consumables and higher inventory shrinkage.
Disciplined cost management lowered selling, general and
administrative (SG&A) expenses in the quarter. SG&A
expense margin leveraged 40 bps to 25.9% in the quarter.
Operating income declined 34% to $5.6 million or 1.1% of sales
compared with $8.5 million or 1.6% of sales in the prior-year
period due to soft sales.
's (FRED) fiscal 2013 earnings of 71 cents missed both the Zacks
Consensus Estimate by 5.3% and company's expected range of 81
cents-86 cents per share. It however surpassed year-ago results
by 8% backed by the company's reconfiguration plans. Net sales
increased 1.4% year over year to $1.9 billion and was in line
with the Zacks Consensus Estimate
First-quarter fiscal 2014
Fred's carrying a Zacks Rank #4 (Sell) provided a conservative
outlook for first-quarter fiscal 2014 as it expects business
headwinds to continue. Moreover, February and March sales have
been heavily impacted by bad weather affecting general
For first-quarter fiscal 2014, Fred's expects total sales to
be flat compared to an increase of 2% in the previous year.
Comparable store sales are expected to be flat to down 2%,
compared to a negative 1.3% in the previous year. Earnings per
share are forecasted in the range of 23 to 27 cents for the first
quarter compared with 31 cents in the year-ago quarter.
Fiscal 2014 Outlook
Management expects general merchandise and pharmacy department
to turn positive in the second half of the year backed by new
programs to reconfigure its stores. For fiscal 2013, Fred's
expects total sales to increase 1% to 3%. Comparable store sales
for 2014 are expected to be flat to an increase of 2% in
Earnings per share for 2014 are expected in the range of 74 to
80 cents up 8% from 2013.
The Zacks Consensus Estimate is pegged at 32 cents per share
for the first quarter and 88 cents for fiscal 2014.
Bad weather conditions during the last two months also
affected discount retailers like
Wal-Mart stores Inc.
) which reported decline in same store sales for the previous
COSTCO WHOLE CP (COST): Free Stock Analysis
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