) is set to report first-quarter fiscal 2014 results on May 29.
Last quarter, the company posted a positive surprise of 13.33%.
Let's see how things are shaping up for this announcement.
Factors to Consider This Quarter
Fred's has been posting decent earnings for the past few
quarters. However, lower comps in all the months of the first
quarter are expected to lower earnings during the quarter.
Ice storms that affected the Southeast region of America in the
initial two months (February and March) of first quarter fiscal
2014 disrupted shopping trends and offset the positive effect of
Fred's' reconfiguration plan.
Although weather improved during April and shoppers returned to
the stores, higher inventory due to lower sales in the first three
months of the calendar year led to delayed spring sales. Moreover,
increased promotional environment and competitive activity in the
discount retail industry hampered sales results in April.
Management also expects these headwinds to mar results for
first-quarter fiscal 2014. Hence, during the April sales conference
call, the company lowered the earnings per share forecast for first
quarter to a range of 18-22 cents from 23-27 cents. The Zacks
Consensus Estimate is pegged at 20 cents for the first quarter of
Despite inclement weather and higher promotional activities,
reconfiguration departments like hometown; auto and hardware
performed are expected to perform well throughout the quarter.
Fred's embarked on a 3-year reconfiguration plan in fiscal 2012 to
focus more on higher-margin categories and move away from
lower-margin consumable categories. The company is remodeling and
refreshing its store layouts and allocating space to highlight key
revenue-generating categories. The company may be able to combat
the headwinds with the help of its reconfiguration strategies.
Our proven model does not conclusively show that Fred's is
likely to beat earnings this quarter. A stock needs to have both a
and a Zacks Rank #1, 2 or 3 to surpass earnings estimate. However,
that is not the case here due to the following factors:
Earnings ESP for Fred's is 0.00%.
carries a Zacks Rank #4 (Sell).
We caution against stocks with Zacks Rank #4 and 5 (Sell-rated
stocks) going into the earnings announcement, especially when the
company is seeing negative estimate revisions momentum.
Other Stocks to Consider
Here are some other companies that investors may want to
consider as our model shows they have the right combination of
elements to post an earnings beat this quarter:
Sanderson Farms Inc.
), Earnings ESP of +2.44% and a Zacks Rank #1 (Strong Buy).
Kors Holding Limited
), Earnings ESP of +1.47% and a Zacks Rank #3 (Hold).
United Natural Foods Inc.
), Earnings ESP of +2.70% and a Zacks Rank #3.
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FREDS INC (FRED): Free Stock Analysis Report
MICHAEL KORS (KORS): Free Stock Analysis Report
SANDERSON FARMS (SAFM): Free Stock Analysis
UTD NATURAL FDS (UNFI): Free Stock Analysis
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