Fred’s Inc. (FRED) is scheduled to report earnings results for the third quarter of 2018 on Thursday, December 13. The company is expected to report a loss of $0.39 per share on revenues of $402 million.
Comparable store sales are likely to fall for the quarter and this, combined with a reduction in circular marketing, is expected to put pressure on both the top and bottom lines. Gross margins are likely to see a decline due to non-recurring prescription rebates, higher remuneration fees and a shift in sales mix.
In the second quarter, Fred’s missed market expectations on revenues, which fell 4.3% to $419.7 million versus the year-ago period. Net loss from continuing operations totaled $22.9 million or $0.62 per share. Comparable store sales decreased 3.5%.
Gross margins in the second quarter dropped by 405 basis points to 23.9% due to prescription rebates in 2017 that did not recur in 2018, increases in remuneration fees and a shift in sales mix. These factors are expected to hurt margins for the third quarter too.
In September, Fred’s agreed to sell pharmacy prescription files of 185 stores to Walgreens Boots Alliance (WBA) for $165 million. This deal is expected to close in the fourth quarter of 2018 and is anticipated to help the company focus on regaining profitability. Fred’s believes it will be able to gain momentum by next year.
Looking at the past three months, Fred’s stock has dropped over 11% while over the past one month, the stock has dropped over 23%. As of 2:40 pm ET on Monday, the stock was down 1.49%.
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