Bad weather in February marred the sales results at discount
). Comparable store sales declined 2.2% in Feb 2014 compared with
a decline of 1.5% in the year-ago period.
Total sales for the month declined 1.0% year over to $157.5
million. Extreme cold weather during the month and snowfall
across the southeast region resulted in frequent shutdown of
shops and reduced operating hours at the stores. This also
disrupted consumer shopping trend and overshadowed the positive
effect of Fred's' reconfiguration plan.
However, reconfiguration departments like pharmacy, pet, auto
and hardware performed well during the month. Fred's also opened
two pharmacy stores in the month.
Fred's embarked on a 3-year reconfiguration plan in fiscal
2012, to enhance its focus on higher-margin categories and move
away from the lower-margin consumable categories. The company is
remodeling and refreshing its store layouts and allocating space
to highlight the key revenue-generating categories.
Fred's is geared to increase pharmacy departments in all its
stores, keeping in view its substantial contribution to the
overall profit. As part of this strategy, Fred's plans to convert
150 to 200 stores in 2014 and take up the pharmacy penetration up
to 60% by 2014-end. The company also plans to implement its
reconfiguration plan in 60 to 80 stores with the Hometown Auto
& Hardware department and seasonal expansions.
Fourth-Quarter Fiscal 2013 Guidance
Fred's is scheduled to report fiscal fourth-quarter 2013
earnings on Mar 27, 2014. Fred's lowered its fourth-quarter
earnings guidance during the January sales conference call.
Earnings are now expected in the range of 13 cents to 16 cents
versus 18 cents to 23 cents as announced previously.
For fiscal 2013, Fred's continues to expect earnings in the
range of 81 cents-86 cents per share, representing 17% to 25%
growth over the year-ago level.
The Zacks Consensus Estimate is pegged at 14 cents per share
for the fourth quarter and 75 cents for fiscal 2013.
Other Stocks to Consider
Fred's currently carries a Zacks Rank #4 (Sell). Some
better-ranked stocks in the retail sector include
Constellation Brands Inc.
Diamond Foods Inc.
The Hain Celestial Group
). All these stocks carry a Zacks Rank #2 (Buy).
DIAMOND FOODS (DMND): Free Stock Analysis
FREDS INC (FRED): Free Stock Analysis Report
HAIN CELESTIAL (HAIN): Free Stock Analysis
CONSTELLATN BRD (STZ): Free Stock Analysis
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