Wednesday, Fred's Inc. (FRED) reported a three-fold increase in profit for the second quarter ended August 1, reflecting a significant reduction in cost which more than offset the decline in net sales. The company issued guidance for third quarter and reaffirmed its full year guidance.
Fred's net income increased to $4.24 million or $0.11 per share from $1.03 million or $0.03 per share for the same period last year.
Excluding expenses related to tax audits and the company's store-closing program the adjusted net income increased to $5.1 million or $0.13 per share. On average, ten analysts polled by Thomson Reuters expected Fred's to report earnings of $0.13 per share. Analysts' estimates typically exclude one-time items.
Quarterly operating income increased by 319.1% to $8.16 million from $1.95 million a year earlier.
Net sales for the second quarter declined by 2.9% to $434.21 million from $447.13 million for the same period last year. Analysts were looking for $437.57 million.
Excluding 74 under-performing stores and 23 under-performing pharmacies closed last year, total sales were flat in the second quarter, Fred's said. On a comparable store basis, second quarter sales declined 1.3%.
Fred's reduced its Selling, general and administrative expenses to $106.10 million from $115.13 million a year ago. While, the cost of sales declined to $313.47 million from $323.28 million for the same period last year.
For the six months, Fred's net income increased by 52.4% to $12.79 million or $0.32 per share from $8.28 million or $0.21 per share a year earlier.
Half-yearly net sales declined by 2.1% year-over-year to $892.59 million from $911.42 million last year.
Looking forward, Bruce Efird, chief executive officer, said "Our objective is to extend the positive trend we have seen in our operating performance while regaining sales momentum."
For the third quarter, Fred's expects earnings per share to be in the range of $0.18 to $0.21 and expects the total sales to increase 1% to 3%.
Fred's said it continues to expect earnings per share for the full year to be in the range of $0.73 to $0.80. Analysts currently expect the company to earn $0.77 per share for the full year.
FRED is currently trading at 13.48, down 0.66% on Nasdaq.
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