UPDATE: Fred's (FRED) Reports Q2 EPS of -$0.62, Revenues Miss, Comp. Sales Down 3.5%

(Updated - September 13, 2018 6:10 AM EDT)

Fred's (NASDAQ: FRED) reported Q2 EPS of ($0.62). Revenue for the quarter came in at $419.7 million versus the consensus estimate of $437.11 million.

• Net sales down 4.3% to $419.7 million in Q2 2018 versus $438.5 million in Q2 2017.
• Comparable store sales decreased 3.5% in Q2 2018 versus a 3.0% decline in Q2 2017.
• Gross profit decreased to $100.5 million in Q2 2018 versus $122.7 million in Q2 2017.
• Gross margin as a percentage of sales decreased 410 basis points to 23.9% in Q2 2018 versus 28.0% in Q2 2017.
• Selling, general, and administrative expenses were $121.9 million in the second quarter of 2018 compared to $150.4 million in Q2 2017.
• Selling, general, and administrative expenses, adjusted for non-recurring items, were $119.4 million in Q2 2018, or 28.5% of sales compared to $131.7 million in Q2 2017 or 30.0% of sales.
• Net loss from continuing operations was $22.9 million, or $(0.62) per share in Q2 2018, compared to a loss of $28.9 million, or $(0.77) per share in Q2 2017.
• Adjusted EBITDA, a non-GAAP financial measure, was $(7.8) million in Q2 2018 compared to $2.0 million in Q2 2017.

Fred’s Interim CEO and CFO, Joe Anto, stated, “We are continuing to make progress against our two main goals of eliminating our debt balance and returning to profitability by Q4 of this year. While there is still much work to be done, we are moving in the right direction and are excited about the momentum we have at the Company.”

Mr. Anto added, “We recently announced an agreement with Walgreens Boots Alliance, Inc. to sell pharmacy prescription files associated with 185 Fred’s stores. This transaction should allow Fred’s to almost entirely reduce the balance on our ABL Facility, allowing us to focus on returning our remaining business to profitability. We expect to close this transaction over the course of Q4.”

Heath Freeman, Chairman of the Board, added: “We have made significant strides in recent months in right-sizing our cost structure and working towards reducing our debt. We remain confident that over the balance of 2018 we will be able to stabilize our revenues and improve our free cash flow, setting us up to enter 2019 with significant momentum.”

For earnings history and earnings-related data on Fred's (FRED) click here.

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