Fred's Lowers Q4 Earnings Outlook; January Comps Rise - Quick Facts

(RTTNews) - Fred's Inc. (FRED) reported an increase in comparable store sales for the fourth quarter of 2015 and the month of January 2016, but lowered its earnings outlook for the fourth quarter, citing deeper gross margin pressures.

For the fourth quarter, Fred's now expects adjusted earnings per share in a range of $0.07 to $0.12, down from the prior range of $0.13 to $0.17 per share.

On average, 7 analysts polled by Thomson Reuters expect the company to report earnings of $0.15 per share for the quarter. Analysts' estimates typically exclude special items.

Jerry Shore, Chief Executive Officer, said, "...we have seen the positive effects of changes made in our operating structure, including a reduction in total expenses and significantly improved operating leverage as a percent of sales. Still, we do not believe this progress will offset the ongoing headwinds we have experienced in our pharmacy department with an unexpectedly sharp decline in cold and flu scripts and sales, resulting in deeper gross margin pressure on the quarter."

Fred's comparable store sales for the month of January 2016 rose 0.7 percent, compared with an increase of 4.3 percent in the year-earlier period. Total sales for the month increased 12 percent to $155.7 million from $139.6 million in the prior-year period.

Fred's total sales for the fourth quarter of 2015 increased 10 percent to $553.8 million from $504.4 million for the same period last year. Excluding sales of $16.0 million from stores closed in the year-ago period, total sales increased 13 percent for the latest quarter.

On a comparable store basis, fourth-quarter sales increased 1.7 percent versus flat comparable store sales in the fourth quarter of last year.

Total sales for fiscal 2015 increased 9 percent to $2.15 billion from $1.97 billion for fiscal 2014. Excluding sales of $71.7 million from stores closed mainly in late 2014, total sales increased 13 percent for fiscal 2015. On a comparable store basis, sales increased 1.5 percent versus a decrease of 0.6 percent for fiscal 2014.