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Fred’s expects Q2 loss; names merchandisers

BY Dan Berthiaume

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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Ann Inc. forecasts Q2 same-store sales drop, cuts guidance

BY Dan Berthiaume

New York – Ann Inc. expects to report a 2.3% decline in consolidated same-store sales for the second quarter of fiscal 2014. Total company net sales are now expected to be $648 million.

At the Ann Taylor brand, total comparable sales increased 0.7%, reflecting an increase of 2% at Ann Taylor, partially offset by a decline of 1.9% in the Ann Taylor Factory channel. At the Loft brand, total comparable sales declined 4.1%, reflecting a decrease of 5.2% at Loft and an increase of 0.3% in the Loft Outlet channel. Selling, general and administrative expenses are expected to be $286 million.

“Despite positive performance through mid-June, the remainder of the second quarter proved more challenging, with soft traffic across the industry and a highly promotional environment,” said Kay Krill, president and CEO. “While we delivered a positive comp for the quarter at Ann Taylor, we were disappointed in our performance at Loft, which experienced continued softness in basic knit tops that represent a meaningful component of Loft’s summer assortment. We took action to move through summer product, which pressured gross margin but enabled us to end the quarter with clean inventories at both brands."

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Study: Zales has highest APR for retail credit cards

BY Dan Berthiaume

Austin, Texas – Zales has the highest annual percentage rate (APR) on its private label card out of 61 U.S. retailers surveyed by CreditCards.com. According to the study, the retailers with the five highest maximum APRs are:

1. Zales, up to a 28.99% APR;
2. Office Depot Personal Credit, up to a 27.99% APR;
3. Staples Personal Account, up to a 27.99% APR;
4. My Best Buy, up to a 25.24% and 27.99% APR, depending on your credit score; and
5. My Best Buy Preferred, up to a 25.24% and 27.99% APR, depending on your credit score.

Conversely, the five retail credit cards with the lowest APR are:

1. OfficeMax Visa Signature Card: 9.99-23.99%
2. Army Air Force Exchange Military Star card: 10.24%
3. Nordstrom retail card: 10.90-22.90%
4. Nordstrom Visa Signature Card: 10.90-22.90%
5. Williams-Sonoma Visa Signature Card: 13.74-21.74%

The private label credit cards reviewed by CreditCards.com have an average APR of 23.23% (compared with an average of just 15.03% for all credit cards), which is up from 21.22% in 2010.

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