Fred's says key sales measure down in October

Fred's says layaway gains popularity, hurts sales trends for October

Associated Press

MEMPHIS, Tenn. (AP) -- Discount-store operator Fred's Inc. said Thursday that a key revenue figure fell 0.8 percent in October as more customers used layaway, which did not contribute to its tally for the month.

The measure, revenue at stores open at least a year, is considered an important indicator of a retailer's financial performance because it excludes sales from recently opened or closed stores.

Total sales for the four weeks that ended Oct. 27 increased 3 percent to $140 million.

The retailer recently launched a holiday season layaway program that only required $1 down on the purchase. This increased traffic in its stores and dramatically increased layaway sales. However, because layaway sales aren't recognized for accounting purposes until customers make their final payment, the company saw weaker sales trends this quarter but expects layaway sales will help its fourth-quarter performance.

Fred's said total sales for its third quarter were up 1 percent to $450.6 million from $444.4 million last year. Revenue from stores open at least a year declined 2.5 percent, compared with an increase of 1.5 percent in the third quarter last year.

This shift in shopping trends caused the company to lower its third-quarter earnings forecast. Fred's now expects to earn 18 to 23 cents per share for the quarter. Analysts polled by Factset had expected the company to earn 23 cents per share for the period.

Fred's expects the layaway sales will help its full-year results and forecast earnings between 96 cents per share and $1.02 per share, above the 98 cents per share that analysts had predicted.

The company operates about 700 discount stores in the Southeast.

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