) sales results improved during May 2014 after suffering for the
past three months due to inclement weather and stiff competition in
the discount retail sector.
Though comparable store sales for Fred's during the four weeks
ended May 31, 2014 declined 0.4%, it was better than a 0.5% fall in
the year-ago month, backed by higher store traffic. Comps were also
better than a 2.3% decline in the previous month - Apr 2014.
Same-store sales, however, missed management's expectation of a
flat to up 2% growth announced during the first-quarter fiscal 2014
Total sales for the month remained flat at $151.9 million,
better than the respective declines of 1.6%, 1% and 1.1% in the
last three months. A harsh winter led to frequent shop shutdowns
and competition emanating from improved weather disrupted sales
during the early months of 2014.
However, conditions turned for the better during the reported
month and the company's new marketing and branding program helped
it to generate higher revenues during the month. Moreover, Fred's'
first ad broadcast during the month helped attract traffic and
heightened consumer awareness of its products.
As of May 31, 2014, Fred's operated 704 discount general
merchandise stores, including 21 franchised Fred's stores, in the
southeastern United States.
Management is optimistic about the company's performance in the
upcoming months. It believes that its revamped stores boasting
15,000 square feet area will enable the company to serve the more
need-based categories and provide an easy shopping
Fred's first-quarter fiscal 2014 earnings of 17 cents missed
both the Zacks Consensus Estimate and year-ago results by 19.04%
and 45.2%, respectively. The first-quarter results also missed the
company's expected range of 18 to 22 cents.
In its guidance provided during the earnings conference call,
Fred's announced that for the second-quarter fiscal 2014, Fred's
expects total sales to increase in the range of 1% to 3% on a
year-over-year basis. Comparable store sales are expected to be
flat to up 2%, backed by new marketing initiatives and pharmacy
department sales growth. Earnings per share are forecasted in the
range of 4 to 9 cents compared with 9 cents in the year-ago
Fred's plans to make several strategic pharmacy store
acquisitions in fiscal 2014. While eight acquisitions are scheduled
to be completed in the second quarter, 12 more are on the cards for
Other Stocks to Consider
Fred's currently carries a Zacks Rank #4 (Sell). Some
better-ranked stocks in the retail sector worth considering include
Citi Trends Inc.
Foot Locker Inc.
American Apparel Inc.
). While Citi Trends sports a Zacks Rank #1 (Strong Buy), Foot
Locker and American Apparel have a Zacks Rank #2 (Buy).
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