Slow And Steady Fred's For You

| About: Fred's, Inc. (FRED)

Recently, Fred's Inc. (NASDAQ:FRED) increased the quarterly dividend by 20%, along with the commencement of a common share repurchase program of an additional 3.6 million shares or 10% of the currently outstanding shares. Talk about enhancement of shareholder's returns, eh?

Although, Fred's is not a large cap company, it definitely shows signs of improving in the future. Its operating margin of 2.54% might catch up to Wal-Mart's (NYSE:WMT) 5.94% or Dollar General's (NYSE:DG) 9.77% mark pretty soon. Remember, the company's debt-to-equity ratio stands at around 1.33x, which proves how cautiously the management is proceeding towards scaling up.

Now, let's take a look at the testified material evidence, in short, the recent financial report.

Net sales increased by over $37 million last year. More sales, better income.

Operating income rose to $51.2 million last year from $46.7 million in 2010. The company definitely seems to be streamlining the processes for maximum profitization.

If you look in the balance sheet, the increasing property assets and decreasing cash assets show the company focuses on capital expenditures, which might result in bigger revenues in the coming years.

Although with the increase of debt (including current liabilities), the shareholder's equity seems to have been compromised a bit, but that will soon be restored if the company manages to scale up in the future.

From the look of it, Michael J. Hayes is pretty careful of every step he takes, and hope the adage "slow and steady wins the race" will prove right this time.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.