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Fred’s delivers on remodel initiative, but sales lag

BY Mike Troy

MEMPHIS — Regional discounter Fred’s made good on its promise of a year ago to further expand a new merchandising initiative, but an intensely competitive market made fourth-quarter sales tough to come by.

Fred’s on Wednesday said sales for its fourth-quarter ended Jan. 28 increased a scant 2% to $498 million from $486 million, and same-store sales increased 0.1%. Profit grew 14% to $9.8 million, compared with $8.6 million the prior year. Earnings per share increased 23% to 27 cents, compared with 22 cents, and benefitted from a favorable adjustment to the income tax rate which added two cents a share. Fred’s CEO Bruce Efird characterized the results as solid in light of the ongoing challenges in the economy and an extremely competitive climate.

"During 2011, we focused on our key strategic goals (of) building customer traffic, increasing market share, and accelerating growth," Efird said. "Both customer traffic and market share increased for the year, and new store openings were up 70% for 2011 with the opening of 26 new stores and 24 pharmacies."

Many of those came during the fourth quarter when Fred’s opened 16 new stores and seven express pharmacy stores as part of its 2011 operating plan. One franchise store closed in the quarter. The company also upgraded 205 existing stores with elements of a merchandising scheme known as Core 5, bringing the two-year total of upgrades to 413 of the company’s 700 stores.

Core 5 is program begun at the start of 2010 which requires moderate changes to store layouts and space allocations to highlight such key trip-generating categories as home, celebration, pet, pharmacy and paper products and household chemicals. Fred’s believes it has a competitive advantage in these areas versus smaller box competitors and by improving customer traffic it can increase sales in higher margin, discretionary categories.

"Recognizing that the current economic backdrop may not improve significantly in our core markets, our team has developed enhanced merchandising plans and expanded product areas to reinforce the Super Dollar and Core 5 programs for 2012," Efird said.

"We are planning to continue our accelerated pharmacy expansion program and leverage the benefits of our pharmacy customers into all areas of our store."

As a result, Efird said the company in the coming year expects to improve its operating margin and produce double-digit earnings per share growth, even though first quarter same-store sales are expected to be flat with the prior year, while total sales are projected to grow between 3% and 5%. Those gains are forecast to produce earnings per share growth in the range of 26 cents to 28 cents compared with 24 cents the prior year. For the full year, total earnings per diluted share are expected to be in the range of 96 cents to $1.04, representing an increase of 10% to 20% over last year.

Fred’s total sales for fiscal 2011 increased 2% to $1.88 billion from $1.84 billion for the same period last year. Comparable-store sales for fiscal 2011 increased 0.5% on top of an increase of 2.2% for the same period last year. Gross margins were flat at 27.7% while expenses as a percentage of sales declined 10 basis points to 24.8%.

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‘It’s not too late to get a flu shot,’ Walgreens, Chicago Health System tell patients

BY Michael Johnsen

DEERFIELD, Ill. — Walgreens and the Chicago Health System on Tuesday reminded CHS patients who were given a flu shot voucher from Walgreens to redeem the voucher by the end of the month and help increase flu vaccination rates throughout the Chicagoland area. Through this program, the health system distributed approximately 25,000 vouchers in January to CHS patients who had not received the vaccination.

“While we have experienced a fairly mild winter, the flu virus is always unpredictable and can peak at any time,” said Ron Weinert, Walgreens VP health systems services. “We want to encourage patients to get a flu shot before their voucher expires as a simple way to protect yourself, your family and community. Our goal is to provide greater access to health care services like immunizations while lowering overall healthcare costs and this program is one way we can help do that.”

According to the Centers for Disease Control and Prevention, through March 10 the national rate of 2011/2012 influenza-like illness incidence has not yet exceeded the national baseline of 2.4% — the marker that typically defines the beginning and end of a season. However, for the week ending March 10 Illinois reported moderate ILI activity and neighboring state Missouri reported a high level of ILI activity.


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Sam’s Club leads in customer loyalty rankings

BY Marianne Wilson

WABAN, Mass. — Sam’s Club has the most loyal customers, according to a new study by the Temkin Group. The report, "2012 Temkin Loyalty Ratings," rated the loyalty that consumers have to 206 large companies across 18 industries.

Only seven companies earned "very strong" loyalty ratings. In addition to the retailers listed above, credit unions and USAA earned the distinction. Sam’s Club had the most loyal customers across all industries, with a loyalty rating of 65%.

Supermarkets, retailers, and fast food chains are the top three industries, with an average loyalty rating of "strong." At the bottom of the ratings: TV and Internet service providers.

The survey examined three components of loyalty, including:

  • Likelihood of consumers to recommend companies;

  • Reluctance of consumers to switch business away from companies; and

  • Willingness to consumers to purchase additional products and services from companies.

Here’s how some of the top U.S. retailers ranked on this year’s survey:

  • Sam’s Club: 65%, which ranked No. 1 in customer loyalty,

  • Publix: 62%, which earned the No. 4 spot;

  • Amazon.com: 61%, which ranked No. 5;

  • H-E-B: 60%, which ranked No. 7;

  • Target: 59%, which ranked No. 8;

  • ShopRite and Hy-Vee both tied for the No. 12 spot with 58%;

  • Winn-Dixie and Kroger tied at No. 16 with 57%;

  • Walgreens: 56%, which ranked No. 21;

  • CVS, Costco and Giant Eagle ranked No. 22 at 55%; and

  • Whole Foods Market and BJ’s Wholesale Club both earned the No. 25 spot with 54%.

Click here to view the complete rankings.

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LarPJ says:
Mar-22-2012 11:43 pm

As far as I can tell, Sam's is the only retailer in the top 10 that requires a membership fee to shop there, which skews the comparison. Obviously, if you're willing to pony up for the opportunity to shop somewhere you'd better be sold on the concept.

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