Fred's, Inc. (FRED) swung to a net profit for the quarter ended Oct. 31, 2015. The company has made a net profit of $1.44 million, or $ 0.04 a share in the quarter, against a net loss of $10.43 million, or $0.28 a share in the last year period. Revenue during the quarter grew 13.61 percent to $541 million from $476.18 million in the previous year period. Gross margin for the quarter expanded 36 basis points over the previous year period to 26.30 percent. Operating margin for the quarter period stood at positive 0.45 percent as compared to a negative 3.48 percent for the previous year period.
Operating income for the quarter was $2.41 million, compared with an operating loss of $16.58 million in the previous year period.
Commenting on the results, Jerry A. Shore, chief executive officer, said, "We are pleased with our third quarter financial results as we achieved adjusted earnings per share in the midrange of our projections. Many positive aspects of our business contributed to the increase in net income of $10 million or $0.26 per share, on an operating basis, compared with the third quarter last year."
For the fourth-quarter, Freds expects revenue to grow in the range of 13 percent to 15 percent. The company projects diluted earnings per share to be in the range of $0.13 to $0.17.
Working capital drops significantly
Fred's, Inc. has witnessed a decline in the working capital over the last year. It stood at $163.33 million as at Oct. 31, 2015, down 27.41 percent or $61.69 million from $225.02 million on Nov. 01, 2014. Current ratio was at 1.51 as on Oct. 31, 2015, down from 1.94 on Nov. 01, 2014.
Cash conversion cycle (CCC) has decreased to 49 days for the quarter from 65 days for the last year period. Days sales outstanding went up to 16 days for the quarter compared with 12 days for the same period last year.
Days inventory outstanding has decreased to 79 days for the quarter compared with 90 days for the previous year period. At the same time, days payable outstanding went up to 47 days for the quarter from 36 for the same period last year.
Debt increases substantially
Fred's, Inc. has witnessed an increase in total debt over the last one year. It stood at $14.82 million as on Oct. 31, 2015, up 307.59 percent or $11.18 million from $3.64 million on Nov. 01, 2014. Total debt was 1.92 percent of total assets as on Oct. 31, 2015, compared with 0.52 percent on Nov. 01, 2014. Debt to equity ratio was at 0.04 as on Oct. 31, 2015, up from 0.01 as on Nov. 01, 2014.
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