Fred’s posts $29.5M net loss in Q1
First-quarter 2019 results from Memphis-based Fred’s made clear that the retailer still is not out of the financial woods. The company posted a $29.5 million loss for the quarter or roughly $0.84 per share — up from the $22 million net loss it posted in the same quarter last year and attributed largely to lower sales volume.
Net sales decreased 5.2% for the quarter, which ended May 4, coming in at $319 million, with comparable-store sales down 8.5% from the previous quarter. The company’s gross profit was $74.6 million for the quarter — a 16.2% decrease from a year ago — while it did reduce its selling, general and administrative expenses to $101.4 million, or roughly 31.8% of sales. In the prior-year period, SG&A expenses made up 32.5% of sales.
“We are disappointed with our operating results for the quarter, but are moving aggressively to right size our store footprint, reduce our cost structure, pay down our ABL and stabilize our operating model,” Fred’s CEO Joe Anto said. “As of June 17th, our ABL balance stood at $51.1 million versus $81.3 million at the end of Q1. We are continuing to work constructively with our banks and per our forbearance agreement, we have specific milestones related to refinancing our current facility, which we are actively working towards. We look forward to sharing updates on this process as soon as possible.”
Fred’s currently is in a forbearance agreement with its lenders, who have agreed to not accelerate the company’s indebtedness or exercise other remedies until after July 22, subject to Fred’s meeting certain conditions. The forbearance agreement followed the company’s February annual report which included a note from its independent accounting firm noting substantial doubt about Fred’s ability to continue as a going concern — which constituted a default event under its credit agreement.
Since permanently naming Anto CEO in February (he had been interim CEO since April 2018), Fred’s has shuttered more than 250 stores, starting with 159 closures in April and a further 104 store closures in May.
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