) reported total sales and comparable sales for December 2012,
both of which declined from the prior-year level.
Comparable store sales for the month dropped 4.2%, versus a
marginal decline of 0.4% in the year-ago level. The decline in
comparable store sales in December 2012 resulted from the ongoing
economic challenges in U.S. that compelled the customers to limit
their discretionary and seasonal purchases.
Total sales for December 2012 dipped 1% from the prior-year to
$209.9 million. Successful completion of the company's layaway
sales program and script improvement in the pharmacy department
was offset by reduced purchasing power due to diminishing
disposable income of U.S. customers.
The company opened four new stores and one Xpress pharmacy and
closed two Xpress pharmacy locations during the month.
The company expects stronger sales in the upcoming months
helped by increased marketing efforts in specialty drugs and
clinical services, as well as contribution from strategic
acquisitions. Moreover, discount tobacco programs and the new
Hometown Auto and Hardware program aiding store expansion are
also expected to boost comparable store sales.
As per the guidance provided during the third quarter
conference call, Fred's expects fourth quarter total sales,
including the one extra week, to increase in the range of 9% to
11%. Comparable store sales, including the extra week, are
expected to increase 6% to 8% in the fourth quarter of 2012.
We are encouraged by Fred's focus on high-margin products and
its initiative of revamping its stores and upgrading stocks to
attract more traffic. These factors in combination bode well for
long-term growth, despite short-term headwinds. However, a tough
retail environment and declining comparable store sales over the
past several months remain a concern.
We currently have a long-term Neutral recommendation on Fred's
which competes with
Dollar General Corporation
Wal-Mart Stores Inc.
). The stock carries a Zacks #3 Rank (a short-term Hold
DOLLAR GENERAL (DG): Free Stock Analysis
FREDS INC (FRED): Free Stock Analysis Report
WAL-MART STORES (WMT): Free Stock Analysis
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