Fred's Inc. aims to make pharmacy a centerpiece of its stores under a major rebranding and remodeling program.

Fred's, pharmacy, discount general merchandise, store remodeling, Bruce Efird, Rick Chambers, Jerry Shore, Prescription Plus, Russell Redman

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Fred's store remodeling plan to spotlight pharmacy

November 24th, 2009

MEMPHIS, Tenn. – Fred's Inc. aims to make pharmacy a centerpiece of its stores under a major rebranding and remodeling program.

Slated to kick off next year, the plan is designed to emphasize the key traffic-driving areas of stores, with remodels featuring a "significantly greater focus on pharmacy," chief executive officer Bruce Efird said Tuesday in a conference call with analysts on Fred's third-quarter results.

"The goal is to transition our entire fleet of stores to the new format by 2011," Efird said.

As part of remodels rolled out this year, which reflected findings of shopper and customer traffic studies, the pharmacy department and health and beauty aids section were brought up closer to the front of the store, among other changes, he explained.

"Those stores have outperformed our traditional stores to date," Efird said, adding that the new format will expand on the improvements made in the 2009 remodels.

Pharmacy has been a solid performer for the 665-store discount general merchandise chain, according to executives.

"During the third quarter, our pharmacy program witnessed strong growth in both sales and script counts, and Fred's achieved a key milestone with the opening of our 300th pharmacy," Efird stated.

Rick Chambers, executive vice president of pharmacy operations, cited the retailer's Prescription Plus program and flu shot business as the main factors propelling pharmacy results in the quarter.

The program, which offers discounts on branded and generic drugs, including 30-day supplies of over 300 generics for $4, started in September and garnered 3,500 new members per week during the third quarter, Chambers said, adding that he expects that rate to continue in the fourth quarter. Overall, the chain has 129,000 Prescription Plus members.

In the 13-week quarter ended October 31, Fred's opened eight pharmacies, including the 300th unit in Greenwood, Miss. For the year to date, the retailer has opened 18 pharmacies, including seven express pharmacy outlets.

The company is also continuing pharmacy acquisition activity, spending $3.1 million on that front in the third quarter, according to chief financial officer Jerry Shore.

Plans call for $7 million in pharmacy acquisition expenditures in 2009, increasing to $15 million in 2010 and 2011, Efird said.

Overall for the third quarter, Fred's reported a 1% gain in sales to $422.4 million, with a 1% uptick in comparable-store sales. During the first nine months of 2009, total sales dipped 1% to nearly $1.32 billion, and comparable-store sales inched up 0.8%. The company didn't break out pharmacy and front-end same-store results.