Fred’s net income falls in Q4

Memphis, Tenn. – Fred’s Inc. reported a substantial 34.5% decrease in its net income during the fourth quarter of fiscal 2013, to $5.56 million from $8.49 million in the same quarter a year earlier. Net sales declined 7.2% to $495 million from $533.4 million, and same-store sales grew 0.1%.



Fred’s cited the impact of favorable tax credits and a 53rd week in fiscal 2012 as affecting its net income results. In addition, Fred’s attributed some of its net sales decline to severe weather, higher-than-normal utility bills, and rising generic drug costs.



"Our company's performance in the fourth quarter reflected all the difficulties that have been cited throughout the retail sector recently as we dealt with the unusually harsh weather of the past several months and a significant 24% increase in the cost of generic drugs, which reduced gross margin by 100 basis points in our pharmacy department,” said Bruce A. Efird, CEO of Fred’s. “Operationally, we achieved earnings of $0.17 per share for the quarter.”



During the full fiscal year, Fred’s net income fell 12% to $26 million from $29.6 million and net sales dropped 0.8% to $1.94 million from $1.95 million.



Looking ahead, total sales for first quarter 2014 are expected to be flat to up 2%. Same-store sales for the first quarter are expected to be flat to down 2% reflecting poor weather conditions and weather-related store closings that have affected Lawn & Garden and other seasonal merchandise.