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Fred’s falls short of January expectations

BY Michael Johnsen

MEMPHIS — Fred’s on Wednesday reported a fiscal 2010 sales increase of 3% to $1.8 billion for the year ended Jan. 29. Comparable sales were up 2.2%, versus an increase of 0.4% in the prior year.

January comp increases of 2.1%, however, fell well short of the 3.9% analyst consensus tallied by Thomson Reuters, a factor that may have had more influence in driving the company’s stock down 37 cents to $13.31 on Wednesday’s trading. Winter weather played a role in those not-as-good-as-expected results, the retailer reported.

"While we were pleased to see customer traffic continue to improve in January, along with stronger pharmacy department comparable scripts and sales, overall sales for the month were below plan,” said Bruce Efird, Fred’s CEO.

“Poor weather and the inability of our customers to get early tax refunds in January were critical factors contributing to the sales shortfall. We experienced sharp sales increases early in January, but as the month progressed, spending dropped significantly and customers placed increased focus on sale items,” Efird added.

Taking the sales and mix effect into account, Fred’s estimated that earnings per share for the fourth quarter will be in the range of 19 cents to 22 cents.

During January, Fred’s opened two new stores and one additional pharmacy. For the year, Fred’s added a net of eight new locations, consisting of 12 new stores and three new pharmacy express stores, which were offset by the closing of seven store locations. The company also opened 23 new pharmacies in 2010 and closed 15, for a net addition of eight pharmacies during the year.

Fred’s operates 677 discount general merchandise stores, including 24 franchised Fred’s stores, in the Southeastern United States.

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CVS’ Q4 driven by same-store sales, Maintenance Choice

BY Antoinette Alexander

WOONSOCKET, R.I. — CVS Caremark announced on Thursday an increase in fourth-quarter same-store sales and a boost in retail pharmacy revenues as pharmacy comparable-store sales benefited from the Maintenance Choice program.

"I’m pleased with our earnings this quarter, which were in line with our expectations. Our retail business continued to produce industry-leading same-store sales and achieved an all-time record operating margin," stated Larry Merlo, who currently serves as president and COO and will be taking the reins as CEO in March.

"The [pharmacy benefit management] business made significant progress last year, with a strong 2011 selling season, high client-retention rates and the introduction of unique products and services that leverage our combined retail and PBM assets," Merlo added.

Retail pharmacy segment revenues for the three-month period ended Dec. 31, 2010, rose 3.1% to $14.9 billion, compared with the prior year’s period. Same-store sales increased 1.7% as front-end same-store sales increased by 1% and pharmacy same-store sales increased 2%, reflecting a positive impact from Maintenance Choice of roughly 220 basis points on a net basis.

The PBM segment posted a 9.7% decrease in revenues to $12.2 billion for the quarter compared with the prior year’s period. Adjusting for the impact of new generics, net revenues would have declined by 2.4% in the segment. The decrease in net revenues primarily was due to the previously announced termination of a few large client contracts, effective Jan. 1, 2010, as well as the decrease of covered lives under the PBM’s Medicare Part D program resulting from the 2010 Medicare Part D competitive bidding process.

Net revenues for the quarter decreased 4.1% to $24.8 billion. Net income totaled $1.03 billion compared with $1.05 billion in the year-ago period.

For 2011, the company expected to generate free cash flow of $4 billion to $4.2 billion, up from $3.3 billion in free cash flow generated in 2010.

Adjusted diluted earnings per share from continuing operations are expected to be between $2.72 and $2.82 for 2011.

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Target hopes PFresh, savings program will drive sales

BY Allison Cerra

MINNEAPOLIS — Target said that although its comparable-store sales were below expectations in the South and Northeast, the company believes overall sales will be driven by two of its recent initiatives.

Target chairman, president and CEO, Gregg Steinhafel, said that while the company "expects the economy to remain challenging, Target’s PFresh remodel program and REDcard Rewards 5% savings program continue to operate in line with expectations."

Net retail sales for Target totaled nearly $4.4 billion, a 3.3% rise from the year-ago period. Meanwhile, January comparable-store sales increased 1.7%. The retailer added that year-to-date sales totaled about $65.8 billion, up 3.7%.

The earnings release shortly followed the company’s announcement to extend its retail operations to Canada, which will be led by Tony Fisher, former Target VP merchandise operations.

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