Fred’s hits midpoint of earnings expectations in Q3

MEMPHIS, Tenn. — Fred’s hit the midpoint of its expected earnings per share in Q3, the company reported Tuesday, the result of a quarter that saw a 14% sales increase that it more or less expects to see again in Q4, projecting growth between 13% and 15%. The company’s adjusted earnings exclude such non-operational expenses as claims assessed for a data breach and charges related to earlier quarters. 

 

“We are pleased with our third-quarter financial results as we achieved adjusted earnings per share in the midrange of our projections,” Fred’s CEO Jerry Shore said. “Despite a sales-mix shift and continued headwinds in the pharmacy department, we realized a 40-basis-point company-wide increase in gross margin as progress with our initiatives in our general merchandise departments led this improvement.”

 

Fred’s had a net income of $1.4 million in Q3, which is a large improvement over its $10.4 million net loss in Q3 last year. Adjusted income hit 3.8 million, compared with an adjusted net loss of $6.2 million in 2014. In the first nine months of 2015, the company has seen a $3.5 million net loss — a number that was at $20.8 million for the first nine months of last 2014. Adjusted, the net loss for the first nine months of the year was $1.9 million, which is down from the $7.2 million adjusted net loss in the same period in 2014. 

 

Gross profits for the quarter were up 15% at $142.3 million, over $123.5 million in the same period last year. In the first nine months of the year, gross profits rose 8% to 411.3 million over the same time last year. The adjusted gross profit was $397.1 million, with gross margin being deleveraged 130 basis points, largely the result of specialty pharmacy growth.

 

Fred’s operating income was $2.4 million ($5.8 million adjusted), an improvement over last year’s third-quarter loss of $16.6 million ($9.8 million adjusted). Operating loss for the first nine months of the year was at  $5.3 million ($2.5 million adjusted), compared with last year’s loss of $32.7 million ($11.1 million adjusted) in the same period last year. EBITDA for the first nine months of 2015 was $33.8 million. 

 

The company closed two Xpress pharmacy locations and acquired two specialty pharmacy-only locations in the third quarter. 

 

Fred’s expects comps to rise 1% to 3% in the fourth quarter, with an expected EBITDA of $22 million to $26 million.