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With flat June sales, Fred’s expects Q2 to be at low end of projected range

BY Michael Johnsen

MEMPHIS, Tenn. — Fred’s on Thursday reported sales of $179 million for the five weeks ended July 2, representing a relatively flat 0.1% increase, compared with the year-ago period.

Comparable-store sales for the month dropped 0.7%, compared with an increase of 1.7% in the same period last year.

"June sales reflected the volatility experienced with our customers’ purchase patterns and demonstrated the broader decline in consumer sentiment that has been reported for the month,” Fred’s CEO Bruce Efird said. “After a solid start in the first half of June, we saw a significant downward adjustment in the last half of the month as customer traffic remained positive but our average customer ticket declined. Another example of the challenging economy was seen in the paycheck cycle, which was very pronounced in the final weeks of the month, but the sales on July 1 were the highest single-day amount for the year,” he said. “Because of less-than-expected May and June sales, we now expect second-quarter earnings to be at the low end of our forecasted range."

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Shoppers continue to alter purchasing behaviors amid rising gas prices

BY Allison Cerra

NEW YORK — Nearly 80% of consumers plan to offset the burden of rising gas prices by altering their shopping behaviors, according to new research.

The survey, conducted by market information leader TNS, also found that 35% of respondents are removing items from their "typical" grocery list to save money. Other ways consumers are saving money is by purchasing private-label items over national brands (30%) and opting to shop at discount outlets over traditional retail outlets (32%).

"Shoppers are careful and watchful of their money, and given the overall level of uncertainty about the economy, it’s not a surprise to us to see consumers rein in their spending on groceries," TNS SVP Dan Boehm said. "Even as gas prices have receded a little from their peak, our research shows consumers are adjusting their grocery shopping patterns to manage a more uncertain conservative purchase environment. More than ever, grocery retailers need to clearly articulate the value proposition they give their shoppers as shoppers make fewer trips per week, buy less and look for discounts."

For marketers of private-label products, Boehm noted that consumers see private label as having an "equal or greater value" and suggested that based on these behaviors, marketers should "communicate why their brands are superior. They should continue to make being visible in the store a priority," he said.

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Health care, beauty contribute to Target’s June comps

BY Mike Troy

MINNEAPOLIS — The 4.5% increase in same-store sales Target reported for June was at the higher end of the company’s expectations and came on top of a prior-year increase of 1.7%.

The gain primarily was driven by an increase in average transaction size, while growth in the overall volume of transactions appeared to be somewhat moderate.

Target chairman, president and CEO Gregg Steinhafel said he was very pleased with the company’s performance at the upper end of a guidance range that called for a low- to mid-single-digit improvement.

“Our teams continue to focus on delivering fashion, value and reliability in every merchandise category both in stores and online. We believe that offering our guests the right combination of wants and needs, along with a great shopping experience, will lead to continued success for Target,” Steinhafel said.

With one month left to go in the company’s fiscal second quarter, Target’s overall same-store sales stand at 3.8%, which the company said is consistent with its expectation that sales results would strengthen following a first quarter in which comps advanced 2%.

Once again, the company saw the strongest performance in the grocery category — where comps increased in the mid-teens — and in health care, beauty and household essentials, where comps were in the mid- to upper-single digits. Also encouraging from a margin standpoint was the fact that the company’s apparel comps were “quite strong” and in line with the total monthly gain of 4.5%.

Other large segments of the company’s business produced uneven results. For example, the hardline businesses experienced a slight decline, but electronics posted an increase in line with the company’s average. A similar situation existed in the home areas, where overall comps declined but such categories as tabletop, sheets and storage experienced an increase above the company average.

The company also noted that its comparable-sales performance was “remarkably consistent” across the country, and it ended the month with inventories “in very good condition.”

Despite the solid June performance, Target isn’t getting ahead of itself with guidance for July and maintains that it expects comps to advance in the range of low- to mid-single digits.

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