MEMPHIS, Tenn.--(BUSINESS WIRE)--
Fred's Inc. (NASDAQ:FRED) today reported sales for the four-week month
of July, which ended August 2, 2014.
Fred's total sales for the month increased 4% to $148.0 million from
$142.6 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.
Fred's total sales for the second quarter of fiscal 2014 increased 2% to
$490.6 million from $482.2 million for the same period last year. On a
comparable store basis, second quarter sales decreased 0.1% versus an
increase of 2.2% for the year-earlier period.
Fred's total sales for the first six months of fiscal 2014 increased 1%
to $988.9 million compared with $983.7 million for the same period last
year. On a comparable store basis, year-to-date sales decreased 1.0%
versus an increase of 0.5% in the same period last year.
Commenting on the announcement, Bruce A. Efird, Chief Executive Officer,
said, "We are pleased that Fred's returned to positive comparable store
sales for July, reflecting stronger trends in general merchandise sales
and improved customer traffic, as recent changes to our marketing plan
have gained additional traction. General merchandise departments that
reported better performance in July included Health Aids, Housewares,
Flooring, Stationery, Toys, Auto & 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 noted that the programs that have been successful in improving
customer traffic and right-sizing inventory have had the initial effect
of lower general merchandise gross margin. The Company also has incurred
increased operating costs related to the inventory adjustments and
establishing clearance centers in all stores.
Additionally, 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 second quarter
accounted for a drop of approximately 225 basis points in pharmacy
department gross margin. However, on a positive note, the Company has
finalized a new pharmacy prime vendor distribution agreement. With this
key strategic relationship, we have a new alliance that supports our
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.
"With the transitional costs associated with implementing our
convenience center model, together with the vendor-related cost
pressures on pharmacy, we now expect to report a loss for the second
quarter in the range of $0.15 to $0.20 per share, exclusive of reserves
for disposition of inventory and stores that do not fit our convenience
model," Efird continued. "However, 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."
Fred's, Inc. operates 704 discount general merchandise stores, including
21 franchised Fred's stores, in the southeastern United States. For more
information about the Company, visit Fred's website at www.fredsinc.com.
Comments in this news release that are not historical facts are
forward-looking statements that involve risks and uncertainties that
could cause actual results to differ materially from those projected in
the forward-looking statements. A reader can identify forward-looking
statements because they are not limited to historical facts or they use
such words as "outlook," guidance," "may," "should," "could," "believe,"
"anticipate," "plan," "expect," "estimate," "forecast," "goal,"
"intend," "committed," "continue," or "will likely result" and similar
expressions that concern the Company's strategy, plans, intentions or
beliefs about future occurrences or results. These risks and
uncertainties include, but are not limited to, those associated with the
Company's announced strategic plan, the ultimate terms of the reworked
pharmacy distribution agreement, lease buyouts and the underlying
assumptions and projections upon which they are based, as well as risks
that intended results may not be achieved or may not occur as quickly as
expected; general economic trends; changes in consumer demand or
purchase patterns; delays or interruptions in the flow of merchandise
between the Company's distribution centers and its stores or between the
Company's suppliers and same; a disruption in the Company's data
processing services; costs and delays in acquiring or developing new
store sites; and the factors listed under "Risk Factors" in the
Company's most recent Annual Report on Form 10-K and any subsequent
quarterly filings on Form 10-Q filed with the Securities and Exchange
Commission.Forward-looking statements speak only as of the date
made.Fred's undertakes no obligation to release revisions to
these forward-looking statements to reflect events or circumstances
after the date hereof or to reflect the occurrence of unforeseen events,
except as required to be reported under the rules and regulations of the
Securities and Exchange Commission.
Source: Fred's Inc.