Fred's experiences vast jump in net income

MEMPHIS, Tenn. Fred's on Thursday reported net income of $16.6 million for the year ended Jan. 31, up 55.1% from the year-ago period.

Fred's total sales for fiscal 2008 totaled $1.8 billion, representing an increase of 1%. Excluding stores closed during the year, total sales from ongoing stores increased 4% in 2008. Comparable-store sales for 2008 increased 1.8% versus 0.3% for 2007, the discounter reported.

"With unprecedented upheaval in the financial markets during the fourth quarter [of] 2008 and evaporating consumer confidence, customers rapidly became much more cautious in their spending and continued to emphasize promotional and basic products throughout the holiday season,” stated Michael Hayes, chairman of Fred’s.

“Fred's clearly benefited in significant ways from these early responses to the year's economic challenges, with improved comparable store sales for the year, a stronger balance sheet highlighted by reduced debt and higher inventory turnover, and improved cash flow," Hayes said. "More important, we now begin 2009 with vastly improved capital and operational structures strengthened by Fred's new leadership as Bruce Efird takes the reins as CEO. Consequently, with various sales and profit-driving initiatives in place, the Fred's team is well positioned to capitalize on the opportunities created for discount retailers by current economic pressures and continue to expand our market share."

During the fourth quarter, Fred's opened six new pharmacies. In 2008, the company has opened 21 stores, closed 74 stores, opened 11 pharmacies and closed 23 pharmacies.

In the first quarter of 2009, the company expects total sales to decline in the range of 2% to 4%, due to the effect of Fred's 2008 store closing program. Comparable store sales are expected to increase in the range of 1% to 3% for the quarter, with the continuation of improved customer response to the company's initiatives to make a more pleasurable shopping trip.

Fred's operated 663 discount general merchandise stores, including 24 franchised Fred's stores at year-end.