Store closings take bite out of overall revenue for month
Fred’s said Thursday that sales for the four weeks ended May 27 totaled $160.1 million, down 3.1% from $165.2 million a year earlier. The company attributed the sales decrease to the closure of 39 underperforming stores in the first quarter.
Meanwhile, comparable-store sales rose 0.8% in May, compared with a 0.4% decline a year ago and a 1.2% gain in April. Fred’s said May comp-store sales reflect a 1% negative impact from the sale of low productive discontinued inventory versus the prior-year period.
“This month, we continued to deliver on our 2017 goals and execute our health care transformation. We are pleased with our performance in the month, with total comparable store sales for May increasing 0.8% compared with the prior year,” Fred’s chief executive officer Michael Bloom said in a statement. “We are seeing substantial momentum in our retail and specialty pharmacy businesses, creating opportunities for growth throughout the company. In retail pharmacy, adjusted script comps are continuing to trend positively, while in the specialty pharmacy business we are consistently experiencing significant sales growth.”
Fred’s continues to awaits regulatory approval 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.
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 if required by the Federal Trade Commission as part of mandated divestitures for antitrust clearance of Walgreens Boots Alliance’s deal to acquire Rite Aid Corp.
“We are confident in the ability of our leadership team and the entire Fred’s Pharmacy team to drive further operational improvement as we continue to build on the foundation we’ve laid for future growth and success,” Bloom added.
Fred’s hasn’t specified where it would pick up stores in the Rite Aid deal. But Jefferies analyst Brian Tanquilut wrote in a research note Wednesday that Fred’s stands to augment its current market base as well as greatly extend its geographical reach.
“Fred’s does not currently have any presence outside of the Southeast, so based on management’s comments, we could see Fred’s picking up significant operations in California, Colorado, Florida, North Carolina and Washington in addition to bolstering their current market share in the Southeast,” Tanquilut said.
Overall, Fred’s currently has 601 discount general merchandise stores, including about 360 in-store pharmacies, and three specialty pharmacy-only locations. The store count also includes 14 franchised Fred’s Pharmacy locations.