Fred's Posts Healthy Sales - Analyst Blog

Fred's  Inc.(FRED- Analyst Report), a leading discount general merchandise store operator in the United States, recently posted healthy sales results for the four-week period ended November 27, 2010.

After registering a growth of 1.2% in October 2010, Fred's experienced comparable store sales growth of 4.7% in November. For the third quarter of 2010, comps climbed 1.5%. Increased store traffic and sound merchandise positively impacted the comparable store sales during the reported month and the quarter.

The company witnessed increased comparable store sales in all the four weeks compared to a decline of 3.3% in the prior-year period. Management stated that with excellent merchandising and marketing strategy in place, Fred's has created exciting shopping experiences for its customers. Moreover, the company has a strong balance sheet with a strong cash position, quality inventory and no outstanding debt.

Net sales for November jumped 4.0% to $1.506 billion from $1.453 billion in the same month last year. In the third quarter, sales climbed 3.0% to $435 million from $422.4 million posted in the same period last year.

The strong third quarter has made Fred's more confident. The company expects total earnings per diluted share for 2010 to be in the range of 74 cents to 78 cents, representing an increase of 25% to 32% over last year. This was further backed by solid comparable store sales in November.  

Fred's, which faces stiff competition from BIG LOTS Inc. (BIG) and Dollar Tree (DLTR) currently operates 672 discount general merchandise stores in 15 states.

Currently, we have a Neutral rating on Fred's. Moreover, the company has a Zacks #3 Rank, which translates into a short-term ‘Hold' rating.

 
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