Pharmacy, makeover lifts Fred’s sales

Fred’s last year migrated its more than 300 pharmacies to a more convenient front-of-store position in an effort to boost pharmacy revenue — and it worked. Fred’s 2010 pharmacy sales growth of 4.8% outpaced the discounter’s overall sales growth of 3% for the year. At the time Fred’s began executing against the pharmacy makeover, the company reported that test stores featuring front-of-store pharmacies enjoyed 20% higher sales per square foot as compared with the company’s average.

Fred’s opened 21 new pharmacies throughout fiscal 2010 and plans additional pharmacy location growth of between 10 and 15 in 2011. “Pharmacy expansion not only enhances margins; it also serves as a proven driver of customer trips and loyalty,” Bruce Efird, Fred’s CEO, told analysts in March. 

Fred’s pharmacy department also was successful in administering 7% more immunizations to patients in 2010 — that’s a build on top of the 17% increase in immunizations Fred’s realized in 2010 vs. 2009 because of H1N1. 

Fred’s also will continue to emphasize the better merchandising mixes to come out of its Core 5 program, which is designed to highlight five strong trip-driving departments where Fred’s feels it has a marketable advantage over other small-box competitors — notably pharmacy, celebration and party, pet products, paper and chemical, and home products. By the end of 2010, Fred’s had roughly 30% of its store base in the Core 5 layout, which features improved merchandising, signage and adjacencies. 

And while Fred’s projects flat comparable pharmacy sales across 2011 because of the number of branded pharmaceuticals losing patent protection and pharmacy reimbursement pressures on the average manufacturing price at the state level, Efird tabbed pharmacy as a key growth driver for Fred’s. “On average, stores with pharmacies have higher front-end traffic, consistently performing at 10% or better than stores without pharmacies,” he said.

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