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Fred’s reports dim January sales, highlights key initiatives for 2010

BY Michael Johnsen

MEMPHIS, Tenn. Pharmacy was about the only sales highlight for Fred’s Inc. through its fiscal 2009, the Southern discounter reported Wednesday evening.

“January sales were below expectation, with the miss resulting mainly from multiple ice and snow storms blanketing the majority of our stores in the Southeast,” commented Bruce Efird, Fred’s CEO. “While December’s sales and traffic demonstrated that our customers were willing to stretch for the holidays at Fred’s, our January sales – outside of ongoing strong results in our pharmacy department – offer a fresh reminder that the consumer remains under considerable pressure.”

Fred’s Inc. posted a 1% drop in fiscal 2009 total sales, generating $1.8 billion for the 52 weeks ended Jan. 30, the chain announced Wednesday evening. Same-store sales were up 0.4%.

For the four weeks ended Jan. 30, total sales declined 1% to $125 million. Comparable store sales fell 2%.

The company’s performance underscores the importance of the implementing new sales- and profit-driving initiatives for 2010, Efird noted. Fred’s key initiatives include:

  • Fred’s Core Five Program, which highlights trip-driving differentiation from small-box competitors, in terms of both price and selection, in the areas of pharmacy, pet products, celebration, paper and chemical, and home products departments
  • Expanded marketing efforts in mailed circulars, in-store marketing, and direct mail advertising
  • Increased investment in its stores, remodeling and updating more than 200 in 2010 with a customer-friendly layout developed in Fred’s pilot program. This initiative includes upgraded fixtures, a cleaner look, improved adjacencies, relocating the pharmacy to the front in some stores, and signage upgrades inside and out
  • Increased advertising and additional in-store marketing to support Fred’s rollout of the new look that is specific to both urban and rural markets
  • The restructuring in January of its merchandising and marketing responsibilities, including the addition of two new divisional merchandise managers in the hard lines area. That increased the number of DMMs to five, adding expertise in three of the core “five program” areas — celebration, pet and home — and bringing new skills to product sourcing; and
  • The addition of new product lines, leading with Coca Cola, Purina pet products, and Energizer batteries, with additional new product introductions to be rolled out in the coming year.

Based on the sales shortfall Fred’s experienced in the fourth quarter 2009, management now expects earnings for the quarter to be in the range of 14 cents to 16 cents per diluted share. For the year 2009, the Company estimates earnings of 59 cents to 61 cents per diluted share, a 40% to 45% increase over 2008.

Looking ahead to 2010, management is optimistic that financial improvement will continue, with diluted earnings per share reaching the range of 68 cents to 75 cents for 2010.

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CVS/pharmacy opens first store in Memphis

BY Antoinette Alexander

WOONSOCKET, R.I. CVS/pharmacy celebrated on Wednesday the grand opening of its first store in the city of Memphis, with more stores planned for the market over the next few years.

Shelby County Mayor Joseph Ford joined CVS officials for the ribbon-cutting ceremony.

“We are pleased to be opening stores in Memphis and expanding our presence in the state of Tennessee,” stated Larry Merlo, president of CVS/pharmacy. “Our mission at CVS is to make pharmacy solutions effective and easy for our customers, so we look forward to providing high-quality and convenient pharmacy services at a great value to our new customers in Memphis.”

The new Memphis CVS/pharmacy is located at 9861 Highway 64. Additional locations on Winchester Rd. and Stage Rd. in Memphis will open later this year, and more stores are planned for the market over the next few years.

As part of the grand opening celebration, CVS/pharmacy announced that, since 2004, it has raised $16 million through its participation in St. Jude Children’s Research Hospital’s annual Thanks and Giving holiday fundraising campaign to support the expansion of the hospital’s Rehabilitation Services Center. St. Jude will hold a ceremony to dedicate the CVS Caremark Rehabilitation Services Center following the CVS/pharmacy grand opening.

“This new facility plays a critical role in helping St. Jude Children’s Research Hospital provide care that not only saves lives, but protects children’s quality of life during treatment for catastrophic diseases,” added Richard C. Shadyac Jr., CEO of ALSAC, the fundraising organization of St. Jude. “Partners like CVS Caremark help ensure that every child who comes through our doors has hope for a brighter future.”

“The CVS Caremark Rehabilitation Services Center was made possible by our customers who support the Thanks and Giving campaign every year and by the dedicated work of our employees,” stated Merlo. “We are very proud that this new facility is helping St. Jude give children the support they need to reach their greatest potential.”

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Report: Costco management changes hint of future succession plan

BY Allison Cerra

ISSAQUAH, Wash. Following the promotion of its EVP merchandising to the roles of president and COO, rumors are circulating that wholesaler Costco may be making a succession plan fpr its CEO position.

Craig Jelinek, a 6-year veteran of Costco, was promoted Monday. Analysts are inquiring whether or not Jelinek’s appointment to president and COO are a way to dispel investors’ concerns over the future of the wholesaler, according to published reports.

Although Costco spokesman Richard Galanti told the Wall Street Journal that the “the [executive] changes are part of a long process” and that the move may indicate of more changes to come, he said CEO Sinegal won’t be retiring for several more years.

Costco currently operates 566 warehouses, including 413 in the United States and Puerto Rico and reported $16.92 billion in net sales for first quarter of fiscal 2010, an increase of 6% from the year-ago period.

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