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Fred’s in $40 million deal with CVS Health

BY Marianne Wilson

That didn’t take very long.

One week after Memphis-based discounter Fred’s announced that it was looking to sell its specialty pharmacy business, the retailer announced it has entered into a deal with CVS Health Corp. Fred’s said it has reached a definitive agreement to sell certain assets of its EntrustRx unit to a subsidiary of CVS Health for $40 million, plus an amount equal to the value of inventory of EntrustRx.” The deal is expected to close by the end of May.

“One of Fred’s top priorities for 2018 has been to monetize non-core assets and we are pleased to have reached an agreement for the sale of EntrustRx,” said Joe Anto, CFO and interim CEO, Fred’s, which operates 600 general merchandise and pharmacy stores across the Southeast. “The cash proceeds will allow us to pay down a significant portion of our debt and also be used for general corporate purposes.”

The deal is in line with CVS Health’s emphasis on its expanding specialty pharmacy business. And it comes as Anto, who was named interim CEO of Fred’s in April when Michael Bloom resigned, is looking to shed some of Fred’s non-core assets in an effort to improve the chain’s profitability. Last week, he said Fred’s was evaluating various options for its retail pharmacy portfolio.

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Camping World Holdings has strong Q1

BY Marianne Wilson

Camping World Holdings saw its sales rise in the first quarter as the company continues to expand its RV-centric footprint.

Total revenue increased 20.4% to $1.1 billion in the quarter ended March 31. Total same-store sales rose 3.9%.

Camping World’s income from operations, net income and diluted earnings per share decreased to $49.8 million, $17.3 million, and $0.08, respectively, and reflected $19.7 million of pre-opening expenses related to the Gander Outdoors store openings. Its adjusted net Income increased 16.5% to $36.9 million, and adjusted earnings per share increased 9.7% to $0.41.

“While the unseasonably cold weather throughout a good portion of the country has likely impacted the early part of the peak selling season, we believe the backdrop across the RV industry remains strong and we continue to plan our business around a mid-single digit increase in same store sales in 2018,” said Marcus A. Lemonis, chairman and CEO, Camping World. “We remain committed to profitable growth and have not seen any changes in the overall acquisition environment.”

In the first quarter, the retailer announced five new acquisitions with six locations across five different states. It also said it plans to open eight new locations late this year and early next year “that we anticipate will begin to combine all of our brands in one location and serve a broad range of RV, outdoor and active lifestyle customers,” Lemonis said.

Camping World Holdings operates 141 Camping World retail locations in 36 states, along with such other outdoor brands as Good Sam, Gander Outdoors, Overton’s, Uncle Dan’s, and Erehwon Mountain Outfitters.

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Toys “R” Us liquidation gives boost to toy sales

BY Marianne Wilson

The toy industry is enjoying a growth spurt.

In the first 10 weeks of 2018, when the toy industry was in a “business as usual” state, U.S. dollar sales grew by 2% — on par with the results for the year-ago period, according to global information company The NPD Group. The proceeding four weeks brought two unique circumstances which converged to lift the industry: the beginning of the Toys “R” Us liquidation (March 15) and an early Easter (April 1).

In those weeks, from March 11 through April 7, toy sales grew by 36% over the same period in 2017 — driving year-to-date growth for the 14 weeks combined to 13%.

Regardless of when it falls on the calendar, Easter sales volume typically experiences a bump in the two weeks leading up to the holiday, providing an annual boost for the industry. Normalizing the year-to-date sales trend to split out Easter and decipher the impact of the Toys “R” Us announcement, results in around $180 million more being generated between March 11 and April 7, 2018. This represents additional toy industry sales that may be attributed to the Toys “R” Us liquidation.

“The Toys “R” Us bankruptcy has brought an incremental sales opportunity to the toy industry, and with at least a month to go until it wraps up, there is still more to come,” said Juli Lennett, senior VP and toys industry advisor, The NPD Group. “Shopping behavior since the announcement indicates that consumers are not pantry loading on Christmas gifts. I estimate that, of the 22% to give in October or later, about half of that is for birthdays or other occasions and the remaining for Christmas, resulting in a net impact on future Christmas sales of less than 1%. Looking ahead towards the holiday season, from what the data shows and what consumers are saying so far, fourth quarter sales should be only slightly impacted by the liquidation.”

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