Fred's September Sales Promise Restored Growth Ahead

October 9, 2014

Fred's CEO Bruce A Efird is confident about the company's initiatives to reposition the convenience-center model, expand marketing and implement new technology - all factors that he expects will help restore growth in the fourth quarter and next year.

Efird added that the initiatives are already producing positive results, despite customer traffic remaining a challenge in the company's markets.

Total sales for September increased 3.3% to $183.6 million from $177.8 million in September 2013.  Comparable store sales for the month increased 0.2% on top of an increase of 2.8% in the same period last year.  General merchandise inventory has been significantly lowered, Efird said, and the company's clearance programs to address unproductive inventory, once again, exceeded the sales plan for September.

Fred's total sales for the year-to-date period increased 1.5% to $1.32 billion from $1.30 billion for the same period last year.  On a comparable store basis, year-to-date sales decreased 0.5% versus an increase of 0.8% for the year-earlier period.

"Our September comparable store sales continued the positive trend we have experienced in recent months in spite of the strong sales performance posted in the same month last year.  Our initiatives to emphasize our convenience-center model continue to gain traction throughout the business," Efird added.  Additionally, our pharmacy department performed well with increases in both comparable scripts and sales.  We are very excited to have our new pharmacy prime vendor agreement in place, which will not only accelerate gross margin improvement in the pharmacy department, but will also support our pharmacy expansion initiatives."

During the month, Fred's closed five full service stores and one Xpress location.  Fred's operates 701 discount general merchandise stores, including 21 franchised Fred's stores, in the southeastern United States.

Source: Retailing Today

Fred's Sees Improvements In August

September 4, 2014

Just two days after reporting second quarter results, Fred's posted August results.  Improved sales and traffic in the month were driven, according to CEO Bruce A. Efird, by initiatives that the company implemented for the first time in August.

Total sales for the month increased 6% to $147.6 million from $139.4 million in August 2013.  Comparable store sales for the month increased 2.3% compared with flat store sales in the same period last year.

"We saw ongoing improvements in virtually all general merchandise departments during August, and our pharmacy department continued to post strong growth in comparable scripts and sales," said Efird.  "Going forward in the third quarter, we will continue to transform Fred's based on the convenience/pharmacy-centric model we recently outlined, a strategy that brings clear advantages to our store operations and customers."

During the month, Fred's opened three Xpress pharmacy locations.

Fred's operates 707 discount general merchandise stores, including 21 franchised Fred's stores, in the southeastern United States.

Source: Retailing Today

Fred's CEO Focuses On Key Wins In Q2

September 2, 2014

Fred's second quarter results reflected the company's strategic decision to build its business model for the future as a convenience/pharmacy-centric store, driven by data-based inventory management, according to CEO Bruce Efird.

The company reported a net loss of $16.4 million for the quarter.  Fred's total sales for the second quarter of fiscal 2014 increased 2% to $491.2 million.  On a comparable-store basis, second quarter sales decreased 0.1%.

The dynamic challenges the company faced surfaced in fourth quarter 2013 throughout its general merchandise and pharmacy departments.  Customer trips came under pressure from what Efird referred to as "Internet intrusion," while generic drug price inflation ramped up faster than the company's payer increases were occurring.  Although its second quarter results were disappointing, Efird pointed to several key wins.

"We saw improvement in general merchandise sales and customer traffic from our new marketing program, which indicates positive traction for the future," he said.  "In pharmacy, we completed the prime vendor agreement that has substantial benefits to all aspects of our pharmacy operations and our specialty division, with components needed to support our accelerated investment in pharmacy acquisitions."

In January, the company took a look at its processes and concluded that retail would not continue with business as usual and changes would have to take place.

"From this thinking came key changes that will drive the transformation of the stores to a convenience/pharmacy-centric store, which began in the second quarter," Efird explained.

Those changes included an acceleration of pharmacy acquisitions that will help Fred's achieve a target of reaching a 65% to 70% penetration rate of stores with a pharmacy.  Fred's derived 40.4% of its sales from pharmaceuticals in the second quarter, compared with 36.4% for the same period a year ago.

Changes also included a new marketing plan, directed at driving customer traffic through multiple avenues, including expanded ad circulars and in-store programs.

The company has been using data-driven inventory and category-management tools and metrics, as well as processing changes to distribution and store procedures to get inventory directly from the truck to the store floor in the same day.  It also plans on closing 60 stores that do not fit the thresholds of the convenience/pharmacy-centric store model, allowing a reallocation of capital.

Fred's also expanded its leadership.  It named Jerry Colley as EVP Store Operations; Ken Donahue as SVP and Chief Information Officer; Craig Barnes as SVP Global Sourcing and Hardlines Merchandising responsibility; and Kelly Ma as VP International and Domestic Sourcing.

Source: Retailing Today 

Fred's July Comps Turn Positive

August 7, 2014

Fred's returned to positive comparable-store sales in July, reflecting stronger trends in general merchandise sales and improved customer traffic.

But Fred's is also exercising some caution and has cut its second quarter outlook.  The company now expects to report a loss for the quarter in the range of $0.15 to $0.20 per share, citing the transitional costs associated with implementing its convenience center model, together with the vendor-related cost pressures on pharmacy.

Fred's total sales for the month increased 4% to $148 million from $142 million in July 2013.  Comparable store sales for the month increased 0.7% on top of a 2.5% increase in the same period last year.

General merchandise departments that reported better performance in July, according to the company, included health aids, housewares, flooring, stationery, toys, auto and hardware, and several consumable departments.

"With our new ad program and marketing strategy now in place, we expect these positive trends to continue in the back half of the year.  Complementing improving conditions with general merchandise, we also saw ongoing sales and script growth in the pharmacy department during July, with our best monthly comparable script growth of the year.  In July, we also rolled out a clearance and inventory right-sizing program in all of our stores to address unproductive inventory and exit or reduce product categories that do not align with our convenience center model - a key to improving our GMROI going forward," Efird said.

Fred's pharmacy department margins for July continued to be pressured by very significant vendor cost increases on both brand and generic drugs.  This cost pressure in the pharmacy for the quarter accounted for a drop of approximately 225 basis points in pharmacy prime vendor distribution agreement.  With this key strategic relationship, the company said that it has a new alliance that supports its rapid growth and addresses the issues experienced over the past year, while restoring Fred's pharmacy department margin and significantly improving the profitability of its specialty pharmacy business.

"The drivers of performance for the balance of the year will be the pharmacy department's new vendor agreement, store shipments returning to forecast, and the continuation of our new marketing programs.  We plan to outline these strategic changes and our expectations for future performance on August 28, when we announce second quarter results and provide updated guidance for the remainder of 2014," Efird added.

Fred's currently operates 704 discount general merchandise stores.

Source: Retailing Today

Fred's Optimistic About New Marketing Program

June 5, 2014

Although comparable-store sales at Fred's declined slightly in May, the company said sales strengthened in the last week of the month thanks to the first ad in its new marketing and branding program, designed to increase traffic and heighten customer awareness of category diversity.

The company's total sales for the month stayed flat at $151.9 million, compared with $152.3 million in May last year.  Comparable-store sales for the month declined 0.4% compared with a 0.5% decrease in the same period last year.

Fred's total sales for the first four months of fiscal 2014 decreased 0.6% to $650.2 million compared with $653.8 million for the same period last year.  On a comparable store basis, year-to-date sales declined 1.5% versus a 1.1% decrease for the year-earlier period.

"The initial results (of the marketing and branding program) were encouraging," said CEO Bruce A. Efird, "and we think this new program will be effective in driving traffic and sales growth as we work toward full implementation of the marketing program by mid-July.  Together with the updating of our store layout to emphasize the convenience advantages of our 15,000 sq. ft. store, it will better position Fred's to serve more of the need-based categories and provide customers with faster and easier shopping experiences."

Fred's operates 704 discount general merchandise stores, including 21 franchised Fred's stores, in the southeastern United States.

Source: Retailing Today

Fred's New Convenience Strategy Shuns Digital

May 29, 2014

Fred's wants to be what it calls "the convenient small box store of choice" and to achieve that goal, it has embarked on a two-pronged strategy focused on general merchandise and pharmacy.

Neither business is new for Fred's, an operator of 704 stores throughout the Southeast, but the need for a new approach to serving shoppers in the digital age was heightened after the company reported weak sales and profits for the first quarter ended May 3.  Sales declined to $498.3 million from $501.5 million and same store sales dropped 1.9% on top of a prior year decline of 1.3%.  The company's first quarter profits of $6.1 million, or 17 cents a share, were roughly half the $11.4 million, or 31 cents a share, profit the company earned the prior year.

There were some legitimate reasons for the weakness, as have been cited by numerous other retailers, but Fred's reasons went beyond the unusually cold weather and a tepid economy to include competitive promotions, issues related to the timing of tax credits and what it referred to as extraordinary inflationary pressures on generic drugs combined with third-party payers reluctant to increase reimbursement rates.

"Realizing that customers' shopping habits are changing faster than ever, we recognize that we need to adapt to these changes and meet customers' needs on their terms," said Fred's CEO Bruce Efird.  "Fred's new strategy takes into consideration the ongoing emergence of internet shopping.  This trend continues to reduce trips to conventinal brick-and-mortar stores, but, at the same time, potentially expands the number of convenience, need-based shopping trips.  We will be marketing the diverse categories we carry compared with other small box competitors to emphasize convenience, using a new marketing and signage strategy."

Rather than add e-commerce capabilities to its website, Efird said the front end of Fred's stores will be re-merchandised with power displays and pallets, along with a faster checkout configuration, all focused on ease of shopping and designed to emphasize the advantages of shopping at Fred's 15,000 sq. ft. stores.  The changes are meant to better position Fred's to serve more of the need-based categories and provide customers with an easier and more convenient shopping experience.

"We are now engaged in a robust reworking of our current pharmacy distribution agreement, with benefits expected to begin in the second half of 2014 and with the full impact anticipated in 2015," Efird said.  "We will be making the general merchandising changes over the balance of this year, which include cleaning out unproductive SKUs and exiting categories that do not align with Fred's enlarged convenience model.  The costs of these branding, marketing and merchandising strategies will be finalized by the end of the second quarter."

The company expects to fully implement a new marketing campaign by mid-July with further plans calling for the new front end, adjacencies and fixtures to be substantially completed early in the fourth quarter.

Source: Retailing Today

Fred's Launches Aggressive Marketing Campaign

May 8, 2014

Fred's plans to implement a long-term marketing strategy stressing everyday low pricing and the convenience of a smaller box to help bolster sales against what the company describes as "intense competitive pressures."  The company's pharmacy operations continue to grow, however.

Fred's reported $150 million in sales for the four weeks ended May 3, representing a decline of 1.6% compared to year-ago sales.  For the first quarter ended May 3, sales totaled $498.5 million, down 0.6%.

Comparable store sales for the month of April decreased 2.3% compared with a 1.2% increase in the same period last year.  On a comparable store basis, year-to-date sales decreased 1.9% versus a 1.3% decrease for the year-earlier period.

"April's sales reflect the limited success of our legacy marketing strategies in matching up with prevailing intense competitive pressures," stated Bruce Efird, Fred's CEO.  "Beginning in late January, we started working with our outside marketing strategies to regain our sales momentum.  Working through extensive research and building a marketing strategy that can be sustained over the long term has taken several months to design, develop and validate", he said.  "One of the key findings of our research has pointed out that the aggressive use of our new strategy today is likely to be quickly embraced, based on the demographics of our customer base.  The team has put together a solid marketing plan to capitalize on Fred's position as a low-price leader and brand our convenience departments' advantages over small-box competitiors."

Fred's pharmacy department continued to demonstrate solid sales gains in April, with higher sales and comparable store script growth.  "However, these improvements were not sufficient to offset the sales shortfall in the other general merchandise departments, which experienced negative comparable sales and traffic declines in April," Efird noted.  "With this in mind, we now expect first quarter earnings per share to be in the range of $0.18 to $0.22.  As we now begin to implement our new marketing strategy, we expect to see its impact beginning in June, when we anticipate a return to positive comparable store sales in the range of 1% to 3%.

During April, Fred's opened three Xpress stores, closed two stores without pharmacies, and converted on Xpress into a full-service store.

Source: Retailing Today

Fred's Fourth Quarter Takes Hit

March 27, 2014

Favorable tax credits and a 53rd week in fiscal 2012 affected Fred's net income results for the fourth quarter.  Severe weather also contributed some to the company's net sales decline, as did higher-than-normal utility bills and rising generic drug costs.

The company reported a substantial 34.5% decrease in its net income during the quarter of fiscal 2013, to $5.56 million from $8.49 million in the same quarter a year earlier.  Net sales declined 7.2% to $495 million from $533.4 million, and same store sales grew 0.1%.

"Our comapny's performance in the fourth quarter reflected all the difficulties that have been cited throughout the retail sector recently as we dealt with the unusually harsh weather of the past several months and a significant 24% increase in the cost of generic drugs, which reduced gross margin by 100 basis points in our pharmacy department," said CEO Bruce A. Efird.  "Operationally, we achieved earnings of $0.17 per share for the quarter."

During the full fiscal year, Fred's net income fell 12% to $26 million from $29.6 million and net sales dropped 0.8% to $1.94 million from $1.95 million.

Looking ahead, total sales for first quarter 2014 are expected to be flat to up 2%.  Same-store sales for the first quarter are expected to be flat to down 2% reflecting poor weather conditions and weather-related store closings that have affected Lawn & Garden and other seasonal merchandise.

Source: Retailing Today

Bad Weather Affects Fred's January Sales

February 6, 2014

The weather posed a significant challenge for Fred's in January.  According to CEO Bruce A Efird, Mother Nature not only disrupted consumer shopping patterns, but also resulted in more than 120 store closings during the final week of the month.

"Prior to the last week of January, sales were running in the mid-range of our forecast, with reconfiguration departments leading the way," Efird explained.

Fred's total sales for January were $134.8 million compared with $173 million for the five-week year-earlier period.

Adjusting to make January sales results comparable with those of the prior year, the company eliminated the first week of the month.  On this adjusted basis, total sales in January decreased 1.1%.  Comparable-store sales for the month decreased 1.8% versus flat comparable store sales in the year-earlier period.

"In the final week of the month, comparable store sales dropped into the negative double digits, culminating in a weather effect on comparable store sales for all of January that is estimated at more than 300 basis points," added Efird.

Efird noted that lower-than-anticipated sales in the last week of January will reduce earnings for the final quarter by approximately $0.03 per share.  Fred's now expects to report fourth quarter earnings per diluted share in the range of $0.13 to $0.16 cents versus earnings of $0.15 per diluted share for the comparable 13-week period last year.

"With January closing out the fourth quarter, we had success in several areas, most notable in our reconfiguration departments that include pharmacy, pet, auto and hardware, which will carry forward in 2014.  We are also in the process of revamping our fourth quarter marketing, promotion and pricing strategies to respond to changing consumer buying habits, along with the increasing popularity of internet shopping.  We are confident that our strategies to build a strong presence in specialty pharmacy and clinical services, together with accelerating pharmacy acquisitions and new pricing, promotion and marketing programs, will lead to continued success in 2014."

During January, Fred's opened one new store and two Xpress pharmacies.  For the year, Fred's added a net total of 25 locations, consisting of 11 new stores and 14 new Xpress pharmacies, which was offset by the closing of 25 store locations and eight Xpress pharmacies.  The company also opened 26 new pharmacies in 2013 and closed 17, for a net addition of nine pharmacies during the year.

Fred's operates 704 discount general merchandise stores, including 21 Fred's stores, in the southeastern United States.

Source: Retailing Today