Fred's reports strong Q3 results

MEMPHIS — Discount retailer Fred's realized positive third-quarter results, thanks to "strong customer traffic, higher gross margins in its general merchandise and pharmacy departments, as well as improved management of controllable operating costs," Fred's CEO Bruce Efird said.

Total sales for the retailer rose 2% to $444.4 million, compared with the year-ago period, while comparable-store sales were flat. Net income increased 16% to $9 million, compared with last year, while earnings per diluted share rose 20% to 24 cents.

During the third quarter, Fred's opened seven new stores and six express pharmacy stores and currently operates 683 discount general merchandise stores, including 22 franchised Fred's stores.

Looking ahead, the company expects total sales for the fourth quarter  to increase in the range of 2% to 4%, while comparable-store sales are expected to increase between 1% and 3%, versus an increase of 2.3% in fourth quarter 2010. Earnings per diluted share are forecasted to increase between 5% and 23% to a range of 23 cents to 27 cents.

"As the company enters the final quarter of the year, we remain confident in our ability to drive earnings improvement," Efird said. "We recognize the continuing strong economic headwinds, including high unemployment levels across our markets and a very competitive sales environment. On the other hand, we are excited about the success of our Core 5 program and other initiatives designed to drive sales and traffic, and believe our merchandising and marketing plans in place will deliver great values and exciting shopping experiences for our customers in the upcoming holiday season. On balance, Fred's remains well positioned to provide a strong finish to 2011 and pursue our longer-term growth objectives."