Fred’s reports results for 3Q 2008
MEMPHIS, Tenn. Fred’s on Wednesday posted total sales of $418 million for its third quarter ending Nov. 1, representing a decline of 0.4 percent as compared to the third quarter of 2007.
On a comparable store basis, third quarter sales increased 1.4 percent.
“We move into the fourth quarter well prepared both financially and operationally,” stated Michael Hayes, chief executive officer of Fred’s. “With all the white noise surrounding the state of the economy, the fourth quarter is certain to be exciting. Despite the uncertainties, the market niche we serve and the ongoing success of our sales and operational initiatives put us in a good position to continue building market share.
For next year, Fred’s is scaling back expected benefits from generic prescriptions dispensed, in part because there will be fewer blockbuster drugs approaching patent expiration. “As we look into 2009 as far as a generics picture, we have, for planning purposes, back off slightly from where we had seen historical trends,” Rich Chambers, Fred’s executive vice president of pharmacy operations, said. “We don’t see the blockbuster drugs that we’ve historically seen back in ‘06/’07 and in the first part of ’08. … But in 2010, 2011 and 2012, when we see some of the bigger names coming off, we would expect [generic utulization] to ramp back up slightly to the numbers that we’re seeing currently as well as in the last year or two.”
Excluding stores closed in 2008, total sales from ongoing stores increased 4 percent over the third quarter of last year, the discount retailer reported.
The company’s average market-basket increased 4.5 percent to $18.80, the retailer reported. “Inventory turns improved to 3.8 turns, from 3.7 at the same time last year, and it is anticipated that we will end this year at 3.9 turns,” Jerry Shore, Fred’s executive vice president and chief financial officer, stated during a conference call with analysts Wednesday morning.
During the third quarter, Fred’s opened one new store and two new pharmacies. For the year-to-date period, the company has opened 17 stores and five pharmacies.
In the fourth quarter, Fred’s expects total sales to fall between 2 percent and 4 percent, reflecting the closing of the 75 stores and 22 pharmacies in line with the company's planned restructuring program. Comparable store sales are expected to be flat for the quarter with strong consumables sales offset by weaker sales in discretionary departments.