Fred's July Comps. Down 4.6%; Now Sees Loss In Q2 - Quick Facts

(RTTNews) - Fred's Inc. (FRED) reported that its total sales for the month of July decreased 7 percent to $154.0 million from $165.6 million in the year-ago period.

Comparable store sales for the month declined 4.6 percent, compared with an increase of 0.7 percent in the year-earlier period.

Jerry Shore, Chief Executive Officer, said "We are disappointed with the Company's performance in the month of July. Our comparable store sales trended well below plan due to four major factors."

According to the company, the timing of government assistance funds, the closure of its pharmacies for the July 4 holiday, worse than expected sales trends in food, beverage, paper and household chemicals, and an industry-wide slowdown in demand for Hepatitis C drugs impacted its comparable store sales for the month.

Fred's total sales for the second quarter decreased 3.4 percent to $527.7 million from $546.1 million in the same period last year. Analysts polled by Thomson Reuters expected revenues of $547.37 million.

On a comparable store basis, quarterly sales decreased 2.0 percent versus an increase of 0.9 percent in the year-earlier period.

For the second quarter, the company now expects to report a loss in the range of $0.18 to $0.24 per share. Earlier, the company forecast earnings in a range of breakeven to $0.03 per share for the quarter.

On average, analysts expect the company to report breakeven results for the quarter. Analysts estimates typically exclude special items.

The revised outlook is based primarily on the significant gross profit impact of its sales miss for the second quarter, combined with unexpected "direct and indirect remuneration" or DIR fees assessed during the quarter.

Further, Fred's said it is reviewing its pharmacy reimbursement strategy to manage the forward magnitude of DIR fees. The company will provide more details of its outlook and expectations for future performance on August 30, when it announces second-quarter results and provide updated guidance for the remainder of 2016.