Sales decline at Fred’s Pharmacy

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Revenue down in April and 1Q, but monthly comps edge up

MEMPHIS, Tenn. — Fred’s Pharmacy reported declined sales for April and its fiscal 2017 first quarter, though seasonal business lifted same-store sales for the month.

Fred’s said Thursday that sales for the four weeks ended April 29 totaled $159.1 million, down 3% from $163.9 million a year earlier.

April same-store sales edged up 1.2% year over year, compared with a 0.3% uptick in comparable-store sales in April 2016.

Comp-store sales for the month include a negative impact of 1% from the sale of low-productive discontinued inventory versus April of last year, according to Fred’s. In addition, April same-store results reflected double-digit sales growth for Easter seasonal categories, which came from the shift of the Easter holiday from March 27 last year to April 16 this year, the company said.

For the 2017 first quarter, sales came in at $532.9 million, down 3% from $549.5 million a year ago.

Same-store sales in the first quarter dipped 1.2%, compared with a 1% gain in the 2016 quarter. Fred’s noted that quarterly comps reflected a negative impact of 1.4% from the sale of low-productive discontinued inventory versus a year ago.

“The Fred’s Pharmacy health care transformation is well under way as we continue to experience sequential sales improvement. The initiatives we began implementing in 2016 and early 2017 are taking hold and laying the foundation for continued success,” chief executive officer Mike Bloom said in a statement.

“We have created substantial momentum in our pharmacy businesses as we make the strategic shift to focus on health care, with specialty pharmacy sales growing double digits and driving our consolidated pharmacy comparable sales,” Bloom noted. “In retail pharmacy, we are seeing sequential growth in adjusted script comps, while our generic dispensing rate has increased as we continue our focus on more profitable scripts. We remain confident in the Fred’s Pharmacy plan to improve our performance and are already realizing the benefits of our comprehensive strategy and talented management team.”

Fred’s said that it closed 39 underperforming stores in the first quarter. The retailer ended the period with 601 discount general merchandise stores, including approximately 360 in-store pharmacies, and three specialty pharmacy-only locations. The store count also include 14 franchised Fred’s Pharmacy locations.

Last month, Fred’s reported decreased sales and a bigger net loss for its 2016 fiscal year as it awaits regulatory clearance to acquire up to 1,200 Rite Aid drug stores in the eastern and western U.S. in connection with the Walgreens-Rite Aid merger.

According to Bloom, Fred’s already has been laying the groundwork for the expansion, including investments in talent and technology, diversification of its specialty pharmacy assets, an enhanced customer experience and improved supply-chain efficiencies.

Under the deal, announced in December, Fred’s agreed to buy 865 Rite Aid stores and related operations for $950 million in cash. Fred’s has committed to acquiring more Rite Aid stores — up to 1,200 — if required by the Federal Trade Commission as part of mandated divestitures for antitrust approval of Walgreens Boots Alliance’s deal to acquire Rite Aid Corp.


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