Fred’s expects Q2 loss; names merchandisers

Memphis, Tenn. – Fred’s Inc. expects to report a net loss of $0.15 to $0.20 per share. The discount chain cited transitional costs associated with implementing its convenience center model, as well as vendor-related cost pressures on pharmacy, as driving the negative profit growth.

However, not all the financial news was bad for Fred’s in the second quarter. Compared to same period a year earlier, Fred’s total sales grew 2% to $490.6 million, from $482.2 million. Same-store sales declined 0.1% for the quarter.

For the month of July, same-store sales rose 0.7%. Fred's total sales for the month increased 4% to $148 million, from $142.6 million in July 2013. Bruce A. Efird, CEO, said stronger trends in general merchandise sales and improved customer traffic, driven by recent changes to Fred’s marketing plan, helped boost July sales.

“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,” said Efird. “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 general merchandise ROI going forward."

In addition, Fred’s announced that Craig Barnes and Kelly Ma will lead its new sourcing team. Barnes assumes the role of senior VP, global sourcing and hardlines, bringing more than 20 years of progressive retail merchandising/sourcing experience to the company. Ma, with eight years of experience in sourcing, product procurement, development, vendor selection, and financial planning, joins as VP, international and domestic sourcing.

Prior to joining Fred's, Barnes was VP for the global independent aftermarket and OE service for Delphi Products & Service Solution. Previously, Ma was the global sourcing-import coordinator for AutoZone.

In other sourcing-related activity, Fred's has engaged Test Rite International Inc. as a strategic sourcing contractor to augment the Fred's global sourcing strategy. Test Rite is a 35-year old organization based in Taipei, Taiwan, and offers sourcing support in Greater China, Southeast Asia, and the Indian sub-continent.


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