Deutsche Bank Starts Fred's Inc. (FRED) at Sell; Secular Headwinds Are Picking Up Speed; Estimates Look Too High for FY11 and FY12
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Price: $0.13 --0%
Rating Summary:
2 Buy, 6 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
2 Buy, 6 Hold, 0 Sell
Rating Trend: = Flat
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Deutsche Bank initiates coverage on Fred's Inc. (NASDAQ: FRED) with a Sell. PT $9.00.
Deutsche analyst says, "Same-Store Sales at FRED face 2 stiff challenges: (1) high exposure to the low-end consumer (avg. household income of $30K), which faces rising food/discretionary product costs and high unemployment & (2) high store overlap in the Southeast (88% of the chain) with all 3 large dollar stores (Dollar General (NYSE: DG), Family Dollar (NYSE: FDO), and Dollar Tree (Nasdaq: DLTR)) along with Wal-Mart (NYSE: WMT). While FRED’s Core 5 remodel program has been a modest success, SSS have trailed its peer group by 448 basis points over the last 4 quarters – a trend we don’t see reversing in the near term."
"Street expectations for both FY11 and FY12 look too optimistic – hence the stock looks like a value trap. To this end, we are modeling FY11 EPS of $0.82 versus the Street’s $0.85 outlook and $0.90 in FY12 (vs. consensus of $1.00). Embedded in our view is for SSS to be 0.6% in 2H11 with a 1% increase in FY12."
For more ratings news on Fred's Inc. click here and for the rating history of Fred's Inc. click here.
Shares of Fred's Inc. closed at $11.62 yesterday.
Deutsche analyst says, "Same-Store Sales at FRED face 2 stiff challenges: (1) high exposure to the low-end consumer (avg. household income of $30K), which faces rising food/discretionary product costs and high unemployment & (2) high store overlap in the Southeast (88% of the chain) with all 3 large dollar stores (Dollar General (NYSE: DG), Family Dollar (NYSE: FDO), and Dollar Tree (Nasdaq: DLTR)) along with Wal-Mart (NYSE: WMT). While FRED’s Core 5 remodel program has been a modest success, SSS have trailed its peer group by 448 basis points over the last 4 quarters – a trend we don’t see reversing in the near term."
"Street expectations for both FY11 and FY12 look too optimistic – hence the stock looks like a value trap. To this end, we are modeling FY11 EPS of $0.82 versus the Street’s $0.85 outlook and $0.90 in FY12 (vs. consensus of $1.00). Embedded in our view is for SSS to be 0.6% in 2H11 with a 1% increase in FY12."
For more ratings news on Fred's Inc. click here and for the rating history of Fred's Inc. click here.
Shares of Fred's Inc. closed at $11.62 yesterday.
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