) comps have been suffering for the past few months due to
inclement weather and stiff competition in the discount retail
sector. After improving in May, it again slowed down a little in
Comparable store sales for Fred's during the five weeks ended
Jul 5, 2014 declined 0.6% which compared unfavorably with a 4.5%
increase in the year-ago period. Morover, same-store sales
marginally missed management's expectation of a flat to up 2%
growth announced during first-quarter fiscal 2014 conference
However, total sales for the month went up 2% year over year to
$191.2 million, better than the respective declines of 1.6%, 1% and
1.1% in the last three months. A harsh winter led to frequent shop
shutdowns and competition emanating from improved weather disrupted
sales during the early months of 2014.
Positive effect from the improvement in weather condition was
partially offset by soft sales during the fourth week of the month.
This was because the company was unable to place its new ad program
during the week. However, conditions turned for the better for the
rest of the reported month and the company's new marketing and
branding program generated better revenues. Moreover, Fred's' ad
broadcast during the month helped attract traffic and heightened
consumer awareness about its products.
Management is optimistic about the company's performance in the
upcoming months. Fred's new marketing plan, including in-store
marketing initiatives focusing diverse product mix offer coupled
with an aggressive advertisement program is going to be operational
first time in July.
Fred's is also undertaking an aggressive clearance program in
July better manage its inventory and exit or reduce product
categories that do not align with Fred's convenience center model.
These initiatives are expected to boost the company's sales and
traffic in the upcoming months.
As of Jul 5, 2014, Fred's operated 704 discount general
merchandise stores, including 21 franchised Fred's stores, in the
southeastern United States. Fred's plans to make several strategic
pharmacy store acquisitions in fiscal 2014. While eight
acquisitions are scheduled to be completed in the second quarter,
12 more are on the cards for the third.
Other Stocks to Consider
Fred's currently carries a Zacks Rank #3 (Hold). Other stocks in
the retail sector worth considering include
Burlington Stores, Inc.
Foot Locker Inc.
Big Lots Inc.
). All these stocks have a Zacks Rank #2 (Buy).
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