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Fred's (FRED) 3Q Earnings Drop 27.4 Pct, Miss Estimates; Cuts 2012 Profit View

 November 20, 2012 09:46 AM
 


(By Balaseshan) Fred's Inc. (NASDAQ: FRED) reported a 27.4% drop in quarterly earnings due to the impact of a shift in layaway sales, unfavorable LIFO expense charges and higher operating expenses. Results missed Street's expectations and the company cut full year earnings forecast.

Earnings for the third quarter were $6.56 million or $0.18 per share, lower than last year's $9.03 million or $0.24 per share.

Sales increased 1% to $450.6 million. Comparable store sales for the quarter declined 2.5%.

Analysts, on average, polled by Thomson Reuters had expected profit of $0.20 per share on revenue of $452.33 million for the third quarter.

[Related -Fred's (FRED) 4Q Earnings Drop 33 Pct, Miss Estimates]

Gross margin rose marginally to 30.7% from 30.6%, driven by a higher pharmacy department gross margin that was partially offset by increased LIFO charges on pharmacy department inventory, as well as promotional markdowns and shrinkage.

Looking ahead into the fourth quarter, the company expects earnings of $0.31 to $0.36 per share and sales growth including the extra week of 9% to 11%, while Street predicts profit of $0.32 per share on revenue growth of 9.70%. Comparable store sales for the fourth quarter are expected to rise in the range of 6% to 8%, or negative 2% to flat excluding the extra week.

For the fiscal 2012, the company lowered its earnings outlook to range of $0.94 to $0.99 per share from previous forecast of $0.97 to $1.04 per share, while Street predicts $0.97 per share.

FRED is trading down 1.84% at $13.34 on Tuesday. The stock has been trading between $12.01 and $15.98 for the past 52 weeks.

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