Fred's, Inc. (NASDAQ:FRED) Q1 2019 Earnings Conference Call Transcript

Jun 19, 2019 • 08:00 am ET

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Fred's, Inc. (NASDAQ:FRED) Q1 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good morning, everyone, and thank you for attending today's conference call to review Fred's financial results for the first fiscal quarter ended May 4, 2019. Joining us today are Fred's Chief Executive Officer, Joe Anto; as well as Fred's Vice President of Brand Marketing, Jen Ehlers. Now, I would like to turn the call over to Jen Ehlers. Jen?

Executive
Jen Ehlers

Thank you. Good morning, everyone, and thank you for joining today's call to review Fred's financials operating results for the first fiscal quarter ended May 4, 2019. Before we begin, I'd like to remind everyone that management's comments during this conference call that are not based on historical facts are forward-looking statements. These statements are made in reliance on the Safe Harbor provision of the Private Securities Litigation Reform Act of 1995 and are subject to uncertainties and risks.

It should be noted that the Company's future results may differ materially from those anticipated and discussed in the forward-looking statements. Some of the factors that could cause or contribute to such differences have been described in the news release issued earlier today and the Company's annual report on 10-K and in other filings with the Securities and Exchange Commission.

We refer you to these sources for more information. Also, I'd like to remind you that during the course of this call, we will discuss certain non-GAAP financial measures. Reconciliations to the most directly comparable GAAP financial measures are provided in our earnings release, which is available on our website at investors.fredsinc.com and on the Securities and Exchange Commission's website at sec.gov, where we filed our earnings release earlier today as an exhibit to our current report on Form 8-K.

Lastly, I would like to point out that management's remarks during this conference call are based on information and understandings believed accurate as of today's date, June 19, 2019. Because of the time-sensitive nature of this information, it is the company's policy to limit the archived replay of this conference call webcast to a period of 30 days. The call is the property of Fred's, and any distribution, transmission, broadcast or rebroadcast of this call for commercial purposes in any form without the expressed written consent of the company is prohibited.

With that, I'd like to turn the call over to Joe Anto, Fred's Chief Executive Officer. Joe?

Executive
Joe Anto

Thank you, Jen, and good morning, everyone. The first quarter was a challenging one for the company as sales in the front store declined versus Q1 of last year. This was due primarily to out-of-stocks, which have been exacerbated by our constrained liquidity situation. Despite the underperformance in our core business, we have made progress over the last two months in rightsizing our store footprint, reducing our cost structure and paying down our ABL.

Additionally, we are continuing to evaluate opportunities to monetize non-core assets, which would enable us to further simplify our business and pay down our ABL further. The previously-announced store closure activity has allowed us to reduce our cash burn (ph) rate