Fred's Misses, Gives Weak View - Analyst Blog
01 4월 2013 - 8:57PM
Zacks
Fred's Inc. (FRED) reported fiscal 2012 fourth
quarter earnings of 18 cents, a decline of 30.7% from the earnings
of 26 cents in the same quarter prior-year. Earnings also missed
the Zacks Consensus Estimate of 19 cents and the company guidance
of 31 cents to 36 cents. The ongoing tough retail environment and
higher operating expenses led to the decline in earnings.
Revenue and Margin Performance
Total sales increased 7% year over year to $533.4 million, which
missed the Zacks Consensus Estimate of $534.0 million. Fred’s
exhibited positive growth on the back of higher merchandise sales
and improved consumer traffic, resulting from marketing
initiatives. Fred’s comparable store sales grew 4.8% during the
quarter.
Gross profits grew 8% to $148.6 million while gross margin
expanded 20 basis points to 27.9% from the year-ago quarter. The
improved margin was the result of higher pharmacy department gross
margin, partially offset by increased charges on general
merchandise margin due to sales mix shift.
Selling, general and administrative expense margin increased 150
basis points to 26.3% in the quarter, due to higher depreciation
and amortization resulting from higher profits in the pharmacy
department.
Operating income plummeted 40.1% to $8.5 million in the quarter
while margins shrank 130 basis points to 1.6% due to higher
operating expenses.
Fiscal Year Results
For fiscal 2012, earnings went up 6.8% to 93 cents from 87 cents
in the prior-year. Earnings beat the Zacks Consensus Estimate of 87
cents and were within the company guidance of 94 cents to 99
cents.
Total sales increased 4% year over year to $1.96 billion, which
were in line with the Zacks Consensus Estimate. Comparable store
sales for the year rose 1.1%.
Other Financial Update
Fred’s exited the 2012-fourth quarter with cash and cash
equivalents of $8.1 million compared to $27.1 million at the end of
the same quarter a year ago. Total liabilities stood at $215.9
million, including long-term indebtedness of $12.2 million, as of
Feb 2, 2013. This compared with total liabilities of $208.4 million
and long-term indebtedness of $6.6 million as of Jan 28, 2012.
Guidance
Management expects tough retail conditions to continue across
the markets in fiscal 2013. For the first quarter of fiscal 2013,
Fred’s forecasts its total sales to increase 1% to down 1%.
Comparable store sales, including one extra week, are expected
to decrease by 1% to 3% in the first quarter due to weak sales in
March. The company expects earnings to remain within a range of 26
cents–30 cents per share in the quarter.
For the fiscal 2013, Fred’s expects lower earnings of 77
cents–88 cents per share compared with fiscal 2012. However,
excluding the impact of favorable income tax adjustment (12 cents
per share) on 2012 results, earnings per share is expected to
increase by 12% to 28% in the year. The Zacks Consensus Estimate is
pegged at 29 cents per share for the first quarter and 82 cents for
fiscal 2013.
Conclusion
Fred’s posted a disappointing fourth quarter with the bottom
line missing the Zacks Consensus Estimate. Although revenues
increased due to higher comparable store sales, increased expenses
constrained margins.
Fred’s currently carries a Zacks Rank #3 (Hold). Other stocks
like Joe’s Jeans Inc. (JOEZ), Ralph Lauren
Corporation (RL) and PVH Corp. (PVH) with
a Zacks Rank #2 (Buy), are worth considering.
FREDS INC (FRED): Free Stock Analysis Report
JOES JEANS INC (JOEZ): Free Stock Analysis Report
PVH CORP (PVH): Free Stock Analysis Report
RALPH LAUREN CP (RL): Free Stock Analysis Report
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