Fred's net income up in 2Q

MEMPHIS, Tenn. Fred's reported increased financial results for second quarter and six months ended Aug. 1.

For second quarter 2009, Fred's net income increased to $4.2 million or 11 cents per diluted share from $1 million or 3 cents per diluted share in the same quarter last year. Included in the results of second quarter were expenses amounting to $0.9 million or 2 cents per diluted share relating to tax audits of the years 2004 through 2007. Excluding the effects of these tax audits and year-earlier net costs incurred with the company's store-closing program, earnings per diluted share increased 30% to 3 cents from 10 cents for second quarter last year, while adjusted net income increased to $5.1 million from $4.2 million for second quarter last year.

For the six months ended Aug. 1, net income increased 54% to $12.8 million or 32 cents per diluted share from net income of $8.3 million or 21 cents per diluted share for the first six months of 2008. Excluding the effects of the tax audits in the current year and net costs incurred with the company's store-closing program in the first six months of 2008, net income increased 19% to $13.7 million or 34 cents per diluted share from $11.5 million or 29 cents per diluted share last year.

Fred's total sales for second quarter of fiscal 2009 declined 3% to $434.2 million from $447.1 million for the same period last year, reflecting the closing of 74 underperforming stores and 23 underperforming pharmacies in 2008. Excluding stores closed last year, total sales from ongoing stores were flat in second quarter 2009 compared with the year-earlier period. On a comparable-store basis, second quarter sales declined 1.3% compared with a 4.9% increase in the same period last year.

For the first half of 2009, total sales declined 2% to $892.6 million from $911.4 million in the year-earlier period. Excluding stores closed last year, total sales from ongoing stores increased 2% in the first six months of 2009 versus the year-earlier period. Comparable store sales for the 2009 year-to-date period increased 0.8% versus 3.5% in the prior-year period.

In third quarter of 2009, the company expects total sales to increase 1% to 3%. Comparable-store sales also are expected to be in the range of flat to up 2% for the quarter. This compares with a comparable store sales increase of 1.4% in third quarter last year. Earnings per diluted share are forecasted to be in the range of 18 cents to $0.21 for third quarter compared with earnings per share of 15 cents in the same period last year. Based on this outlook, the company expects total earnings per diluted share for 2009 to be in the range of 73 cents to 80 cents.