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Fred’s reports decreased sales for October

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MEMPHIS, Tenn. — Sales continued to slump at Fred’s Inc. as the company posted declines for October.

Fred’s said Thursday that revenue for the four weeks ended Oct. 29 totaled $157.3 million, down 4.2% from $164.2 million a year earlier. Same-store sales decreased 3.4%, compared with a 2.3% uptick a year ago.

“While we continue to make broad progress in addressing the issues that have affected our sales over the past several months, these improvements were obscured primarily by four discrete factors in October that prevented us from hitting our sales expectations for the month,” according to Fred’s chief executive officer Michael Bloom.

He cited “unexpected challenges” in the discount and pharmacy retailer’s switch to a third-party distributor for several key front-end categories; the calendar shift for Halloween, which this year pushed the holiday into fiscal November; significant reductions in SNAP payments; and warmer-than-expected weather during October.

Retail pharmacy sales were pressured by an ongoing shift to 90-day prescriptions, “but our specialty pharmacy sales, while still running below last year’s level due to an industrywide slowdown in hepatitis C drugs, gained further ground in October with month-over-month growth,” Bloom stated.

“Outside of these headwinds, which we consider to be transitory, as well as the tough comparisons we have faced against last year’s sales, we remain confident in the strategic path for Fred’s,” he added. “With the key initiatives we have in place to drive future growth and improve profitability, we continue to make bold strategic shifts in our business.”

Also on Thursday, Fred’s gave a preview of third-quarter results, which it plans to report along with November sales on Dec. 2 at the company’s analyst day event in New York.

Sales for the third quarter decreased 4.5% year over year to $516.7 million from $541 million, while comparable-store sales were down 3.8% versus a 2.7% gain in the prior-year period.

For the year to date through Oct. 29, Fred’s sales were flat at $1.596 billion. On a comp-store basis, year-to-date sales dipped 1.7%, compared with a 1.5% rise in the year-ago time frame.

Fred’s also said Thursday that it’s suspending the company’s previously issued guidance for the 2016 second half because it “does not reflect management’s vision for the future of Fred’s.” The retailer attributed the move, in part, to current revenue trends and “the evolving nature of the company’s business,” including the optimization of its store fleet and other initiatives that management is slated to discuss at the analyst day event.

Currently, Fred’s has 648 discount general merchandise stores, including 18 franchised locations, and three specialty pharmacy-only locations in 15 Southeast states. The store base also includes 370 pharmacy departments, four of which are in franchised locations.


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