Fred’s overhauls ops and marketing, explores sale

Regional discount retailer Fred’s is making some big changes to its merchandising and operations groups to begin 2014 and has retained several firms to review strategic opportunities.

On the heels of a 1.4% same-store sales increase in December, driven by its pharmacy business, Fred’s said it had retained BofA Merrill Lynch and Peter J. Solomon Company to review strategic opportunities to enhance shareholder value. In addition, the operator of 701 stores throughout the Southeast, gave CFO Jerry Shore additional responsibilities as COO and said CEO Bruce Efird would lead the merchandising and marketing team and strategy.

"The merchandising and marketing team has been revamped and now will report directly to me,” Efird said. “We have developed new pricing, marketing, inventory management and profit strategies that are designed to drive greater profitability throughout the year, with a key goal of re-energizing fourth-quarter results in 2014.”

In addition, Fred’s will continue to implement the successful elements of a reconfiguration plan, a key aspect of which involves the addition of pharmacies to its discount stores. The company plans 150 to 200 conversions in 2014, which will leave it with pharmacies in 60% of its store by the end of 2014.

The moves come as Fred’s experienced a challenging sales climate throughout 2013. The company’s year-to-date sales increased 1% to slightly more than $1.8 billion, while same-store sales declined 0.9%.

"While December sales were in the range of our expectations, they were driven primarily by the strong performance of our pharmacy department, as the discretionary departments in general merchandising fell short of plan,” Efird said. “The positive impact from our reconfiguration plan continued in December, driven mainly by our hometown auto and hardware department. However, in spite of the success of our reconfiguration program, Fred's 2013 fourth-quarter promotional strategy, which was centered on Black Friday, did not produce the incremental gains we expected.”


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