Post Earnings Coverage as Fred's Earnings Results Surpassed Expectations
Upcoming AWS Coverage on Tuesday Morning
LONDON, UK / ACCESSWIRE / April 17, 2017 / Active Wall St. announces its post-earnings coverage on Fred's, Inc. (NASDAQ: FRED). The Company reported its financial results for fourth quarter and fiscal 2016 on April 06, 2017. The discount retailer also reported March 2017 sales numbers. Register with us now for your free membership at: http://www.activewallst.com/register/.
One of Fred's competitors within the Discount, Variety Stores space, Tuesday Morning Corp. (NASDAQ: TUES), is estimated to report earnings on May 05, 2017. AWS will be initiating a research report on Tuesday Morning following the release of its next earnings results.
Today, AWS is promoting its earnings coverage on FRED; touching on TUES. Get our free coverage by signing up to: http://www.activewallst.com/register/.
Earnings Reviewed
For the three months ended January 28, 2017, Fred's net sales decreased 4.5% to $529.7 million from $554.6 million for Q4 FY15. The Company's revenue numbers lagged behind analysts' consensus of $530.7 million. Fred's comparable store sales for the reported quarter decreased 3.6% versus a 1.7% increase in comparable store sales in the year ago same quarter. Comparable store sales in Q4 FY16 included a negative 2.6% impact as a result of the sale of low productive discontinued inventory versus Q4 FY15. Fred's net sales for FY16 decreased 1.2% to $2.13 billion from $2.15 billion. On a comparable store basis, FY16 sales decreased 2.2%.
For Q4 FY16, Fred's gross profit decreased 2.5% to $129.6 million from $132.9 million in Q4 FY16. The Company's gross profit margin for the reported quarter increased 50 basis points to 24.5% from 24.0% in the prior year's same quarter. The margin includes a $3.1 million benefit on a pre-tax basis or $0.05 per share after tax resulting from the successful sale of discontinued inventory above estimated marked down cost. Fred's recorded LIFO adjustments of $2.0 million in Q4 FY16 compared with $4.0 million in the same quarter last year. Fred's gross profit for FY16 decreased 6.2% to $510.3 million from $544.2 million the year before. Gross margin for FY16 decreased 130 basis points to 24.0% of sales compared with 25.3% in the prior year comparable period.
During Q4 FY16, Fred' s operating loss, or EBIT, was $22.2 million versus a $5.1 million loss in Q4 FY15. The Company's EBITDA was a loss of $10.5 million, or 2.0% of sales, for the reported quarter compared with earnings of $6.8 million, or 1.2% of sales, for the year ago same period. Fred's operating loss for FY16 was $74.7 million, or 3.5% of sales, compared with a loss of $10.4 million, or 0.5% of sales, in FY15. The Company's FY16 EBITDA was a loss of $27.7 million, or 1.3% of sales, compared with EBITDA of $35.3 million, or 1.6% of sales, in FY15.
For Q4 FY16, Fred's recorded a net loss of approximately $22.5 million, or $0.60 per share, compared with a net loss of $3.9 million, or $0.11 per share, for Q4 FY15. During the reported quarter, the Company recorded charges totaling $23.4 million, or $0.49 per share, after tax during the quarter. Post adjustment, Fred's reported loss of $0.11 per share, which bettered market expectations of a loss of $0.19 per share.
March 2017 Sales
Fred's also reported sales for the five-week fiscal month ended April 01, 2017. Fred's total sales for the month decreased 2.7% to $208.6 million from $214.3 million in March 2016. Comparable store sales for March decreased 0.5% versus an increase of 1.8% in the year-earlier month. The March 2017 comparable store sales reflected the benefit of tax refunds, which were delayed from February to March, but were offset by a later Easter, shifting holiday sales into April.
The Rite Aid Transaction
On December 20, 2016, Fred's announced that it signed an agreement with Walgreens Boots Alliance, Inc. and Rite Aid to purchase 865 stores for $950 million in cash. The Company stated that Fred's Pharmacy is working collaboratively with Walgreens Boots Alliance, Rite Aid, and the Federal Trade Commission ("FTC") to help obtain the FTC's approval of Walgreen Boots Alliance's pending acquisition of Rite Aid and the divestiture of certain Rite Aid assets to Fred's Pharmacy. Fred's Pharmacy remains committed to purchasing additional assets, including up to 1,200 Rite Aid stores, to the extent necessary to obtain the FTC's approval of the transaction.
Stock Performance
At the close of trading session on Thursday, April 13, 2017, Fred's share price finished the trading session at $15.03, marginally sliding 0.20%. A total volume of 696.24 thousand shares exchanged hands. The stock has advanced 65.31% and 3.56% in the last six months and past twelve months, respectively. The stock currently has a market cap of $562.42 million and has a dividend yield of 1.60%.
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