Fred’s Closing 75 Stores
Memphis, Tenn. Fred’s Inc. will close 75 stores this year as part of a new cost-cutting campaign aimed at increasing the chain’s annual operating margin by 4.5%.
The company said 75 under-performing locations, representing more than 10% of the chain, will be shuttered. However, the retailer plans to open 18 stores and 15 pharmacies in 2008.
Other goals of Fred’s cost-cutting campaign include reducing corporate overhead by 10%, generating $11 million in annualized cash savings beginning in the second half of 2008, and launching merchandising programs to enhance margin.
“Taking actions now will increase our operating margin by more than 150 basis points and generate over $100 million in free cash flow over the next three years,” said CEO Michael J. Hayes.
Award offers insight into marketing push
Wal-Mart’s increased emphasis on consumer insights, which surfaced two years ago, has resulted in The NPD Group being recognized as the syndicated supplier of the year for a department called, “insights and customer strategy.”
Accolades for supplier of the year are common throughout the retailer industry, but are typically bestowed on merchandise suppliers. In Wal-Mart’s case, the award received by The NPD Group underscores the important role now occupied by providers of consumer insights that follows a major shift several years ago that saw Wal-Mart adopt a customer segmentation strategy.
That shift followed a major overhaul of Wal-Mart’s marketing department that infused the organization with executives from the consumer packaged goods industry where customer segmentation strategies are commonplace. As Wal-Mart sought to better understand the behaviors and motivations of the customers shopping its stores, supplier teams dedicated to the Wal-Mart and Sam’s Club accounts increased their research capabilities and information providers developed new products.
That was the case with The NPD Group which created a customized Consumer Tracking Service for Wal-Mart and Sam’s Club, which provides the retailers and select suppliers with an extensive view of what’s happening within and across categories based on identified consumer segments.
Market unfazed by top line disappointment
Investors didn’t seem to mind that January same-store sales results that Wal-Mart reported on Thursday for its U.S. operations were weaker than expected. Despite the disappointment, shares of the company traded higher on the day following an early morning sale release that showed January comps totaled 0.2%, compared to guidance of 2%. The news caused shares to open sharply lower at $47.85 from Wednesday’s close of $48.83. However, Wal-Mart shares staged a recovery throughout the day on heavier than normal trading volume to close up $1.01 at $49.84.