Fred's key sales measure rises in October

MEMPHIS, Tenn. (AP) — Discount retailer Fred's Inc. said Thursday sales in stores open at least a year edged up 0.4 percent in October, missing analyst expectations.

The company said expenses to advertise and discount products to woo cautious consumers will hurt its performance in the quarter, as will a large increase in layaways.

Analysts polled by Thomson Reuters predicted an increase of 1.3 percent.

Sales at stores open at least a year are considered a key measure of retailer performance because they measure growth at existing stores rather than from newly opened ones.

Total sales for the four-week period ended Oct. 31 fell 0.2 percent to $128.1 million.

For the quarter, sales at stores open at least a year rose 1 percent, while total sales edged up 1 percent to $422.7 million.

CEO Bruce Efird said Fred's saw strong growth in its pharmacy department in October, but general merchandise sales were below projections. He said promotional activity was accelerating in the marketplace, so Fred's increased its advertising and promotions in the quarter, but that ended up hurting performance. He said volume increased but total sales couldn't offset the increased markdowns, so third quarter results will be hurt by between 3 cents and 4 cents a share.

He added the company has budgeted for these expenses in the future.

Layaway increased six-fold in October, compared to the same period last year. Those sales cannot be recorded in the quarter, so that will also hurt results by between 3 cents and 4 cents a share. Those sales will be recorded in the fourth quarter.