MEMPHIS, Tenn. — Fred’s, Inc. on Thursday reported financial results for the third quarter and nine months ended November 3. The retailer also announced it will complete the transfer of prescription files from 179 of its pharmacies to Walgreens Boots Alliance early next year.
Joe Anto, Fred’s interim chief executive officer and chief financial officer, stated “We have made significant progress against our goal of strengthening the balance sheet and as of December 12, 2018 our ABL balance stood at $51.9 million vs. $153.4 million as of the beginning of this Fiscal Year. As of December 12, 2018 we completed the sale of script files associated with approximately 138 locations to Walgreens and expect to complete the remaining 41 location transfers to Walgreens by the end of January 2019. As we have stated in the past, we are continuing to evaluate potential opportunities to monetize all our non-core assets including our retail pharmacy script portfolio as well as our real estate.”
“There is still much work to be done with regards to our operations. We are continuing to execute against our turnaround plan, with a focus on bringing in talent, optimizing our cost structure and improving the front store business,” he added. Among the highlights of Fred’s third quarter, compared to the prior year quarter, are:
- Net sales down 5.5% to $306.4 million in Q3 2018 versus $324.3 million in Q3 2017.
- Comparable store sales decreased 5.3% in Q3 2018 versus a 1.0% decline in Q3 2017.
- Gross profit increased to $77.0 million in Q3 2018 versus $70.0 million in Q3 2017 due primarily to a one-time markdown reserve charge that was recorded in Q3 2017.
- Gross margin as a percentage of sales increased 353 basis points to 25.1% in Q3 2018 versus 21.6% in Q3 2017, with much of the improvement due to the impact of the one-time markdown reserve charge recorded in Q3 2017.
- Selling, general, and administrative expenses (including Depreciation and Amortization) were $105.6 million in the third quarter of 2018 compared to $118.3 million in Q3 2017.
- Selling, general, and administrative expenses (including Depreciation and Amortization), adjusted for non-recurring items, were $103.0 million in Q3 2018, or 33.6% of sales, compared to $110.6 million in Q3 2017, or 34.1% of sales.
- Net loss from continuing operations was $30.8 million, or $(0.83) per share, in Q3 2018, compared to a loss of $50.4 million, or $(1.35) per share, in Q3 2017.
- Adjusted EBITDA, a non-GAAP financial measure, was $(20.6) million in Q3 2018 compared to $(13.2) million in Q3 2017.