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Alliance Data’s BrandLoyalty signs agreement with Kroger

BY Antoinette Alexander

Alliance Data Systems, a provider of loyalty and marketing solutions, announced on Thursday its LoyaltyOne business BrandLoyalty has launched a new program across Kroger stores in the Mid-Atlantic region.

Launched on May 2, the eight-week promotional campaign is featured in 121 Kroger stores across the Mid-Atlantic, including North Carolina, Ohio, Kentucky, Tennessee, Virginia, and West Virginia.

As the first program rolls out between the businesses, the collaboration between BrandLoyalty and Kroger seeks to grow sales with an increase of customers, basket size, and frequency of shoppers through this incentive-based, short-term promotion, the company stated.

“We’re excited to have the opportunity to work with Kroger on this program that will leverage BrandLoyalty’s combination of expertise in loyalty programs, analytics, and retail industry knowledge in order to drive sales, boost profitability, and build customer loyalty in the highly competitive grocery segment,” said Bryan Pearson, president and CEO of LoyaltyOne.

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Kroger to exit Raleigh-Durham market

Harris Teeter to acquire eight locations

BY Antoinette Alexander

Kroger has confirmed that it will exit the Raleigh-Durham, N.C., market on or about Aug. 14, by closing and selling its 14 locations.

“After a thorough evaluation of the market for a significant time period, we have decided to close our stores in the highly competitive Raleigh-Durham market,” said Jerry Clontz, president of the Mid-Atlantic division of Kroger.  “While we have had some success, we have not been able to grow our business the way we would like in this market.

Added Clontz, “The retail environment is challenging and changing in Raleigh-Durham. Many retail analysts say the Raleigh-Durham market is over-stored.”

The closures will impact about 1,500 employees, more than half of which are part-time associates.

“We’ve been a part of the Raleigh-Durham market since 1989, and our associates have provided customers with top-notch service,” said Clontz.  “Helping them through this transition is our number one priority.

“We’re making every effort to assist our associates in finding employment,” said Clontz. “We will offer job fairs and job placement services to associates. Our associates also have access to our employee assistance programs to help them manage through this process.”

Food Lion has snapped up one store and Crunch Fitness will also move into one location in Raleigh. Harris Teeter has announced that it will acquire eight stores in the Raleigh-Durham area. Clontz said Kroger is in discussions and exploring potential options for the remaining locations.

Harris Teeter expects the transaction to be completed in August and intends to finalize its remodel and re-opening plans while the stores are closed. Pharmacies at five of the purchased stores will remain open throughout the transition.

“Kroger has a long tradition of operating in this area, as does Harris Teeter” said Danna Robinson, communication manager for Harris Teeter. “Our valued associates have proudly served these Raleigh-Durham communities for decades, so these store locations are especially attractive to us. We plan to invest in remodeling a number of these locations to better serve our shoppers in this growing and vibrant market.”

Kroger Mid-Atlantic worked with The Food Partners, a Washington, D.C.-based, grocery industry focused investment banking firm, as a strategic adviser for the divestiture of these stores.

Kroger Mid-Atlantic operates 108 additional stores in Virginia, West Virginia, Tennessee, Kentucky and Ohio.

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Fred’s hires firm to court pharmacy buyers

BY David Salazar

Memphis-based company Fred’s has hired PJ Solomon & Co. to assess the value of its pharmacy script portfolio and engage with potential buyers, the company announced alongside its Q1 2018 results Thursday.

“That process is well underway and we will provide updates as appropriate,” Fred’s interim CEO Joe Anto told analysts on a call Thursday. “Additionally, we are engaged in sale processes for various properties within our real estate portfolio and expect to have multiple transactions closed over the course of this fiscal year.”

These strategic transactions — which follow the company’s sale of its specialty pharmacy business, EntrustRx, to a CVS Health subsidiary earlier this year — are efforts the company has undertaken as part of what Anto called a “reset” after it posted a net loss of $139.3 million for fiscal year 2017. The company’s two main goals, Anto said, are eliminating its debt balance — largely accrued in the scrapped plan to acquire Rite Aid stores that would have been divested had Walgreens successfully purchased Rite Aid last year — and generating positive EBITDA and free cashflow by Q4 of this fiscal year.

For the quarter, Fred’s posted a 5.1% decline in net sales compared with last year’s Q1, bringing in $437.1 million. Comparable-store sales dipped 3.9% for the quarter — an improvement over the 4.2% decline comps saw in Q1 2017. The company’s gross profit dropped to $11.6 million, compared with $128.6 million a year ago, and gross margin as a percent of sales decreased 220 basis points to 25.5%, compared with 27.7% in Q1 2017. Fred’s posted a net loss of $19.9 million, which was an improvement on the net loss of $37.8 million it posted in the year-ago period.

Fred’s said that eating into its gross profit were direct and indirect remuneration fee increases for 2018, as well as prescription rebates from 2017 that did not recur this year and a shift in sales mix.

Fred’s saw selling, general and administrative expenses comprise 29.7% of sales — down 560 basis points from the 35.3% of sales it made up in the year-ago period. Anto noted that this reflects, in part, a decrease in the headcount at its headquarters, which currently totals roughly 274 people, compared with 440 people at the same time last year. Among those no longer in the headcount is former CEO Mike Bloom, who departed the company in April. Alongside decreasing its expenses, Anto noted that the company also has made strides in paying down its debt, with its asset-backed loan borrowings standing at $135 million as of June 12 — down from $162 million at the end of Q1 on May 5. The company’s available liquidity currently stands at $60 million.

“We expect our ABL balance to continue to decrease over the coming weeks, as we collect all remaining receivables associated with the specialty pharmacy business,” he said. “We continue to explore other strategic transactions and expect to generate additional cash proceeds which should meaningfully reduce our debt balance.”

 

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