Fred’s sees 4.5% Q3 sales decline, suspends guidance for second-half of 2016

MEMPHIS, Tenn. — Fred’s on Thursday released its sales results for the fiscal month of October, as well as its Q3 and year-to-date sales results for the period ended Oct. 29. The company has also made the decision to suspend its previously issued guidance for the second half of 2016 and announced the date it would be releasing November sales and third quarter financial. 

 

For October, the company’s sales decreased 4.2% to $157.3 million over October 2015, when it brought in $164.2 million. The month’s comparable-store sales also declined, 3.4%, compared to a 2.3% increase in the same period last year. Fred’s CEO Michael Bloom said that the tough sales month could be attributed to four factors. 

 

“In the front store, we encountered unexpected challenges in our transition to a third-party distributor for several key categories,” Bloom said. “October sales also were affected by the calendar shift for Halloween, as we cautioned last month, which pushed the holiday into the fiscal month of November this year versus October last year. Significant reductions in SNAP payments and warmer-than-expected weather during the month also contributed to October's sales decline.”

 

Bloom said that the company’s retail pharmacy sales continue to see pressure from a continuing shift to 90-day prescription fills, but noted that specialty pharmacy sales showed month-over-month growth in October, even as it runs below last year’s levels due to a slowdown in hepatitis C drugs. 

 

For the third quarter, Fred’s saw $516.7 million in sales, a 4.5% decrease from the same period last year. Q3 also saw a 3.8% decline in comps, compared to a 2.7% increase in comps seen in last year’s third quarter. The company’s YTD sales were flat at $1.596 billion, with a 1.7% decline on a comparable store basis, compared to a 1.5% increase in the YTD at this point last year. 

 

“Outside of these headwinds, which we consider to be transitory, as well as the tough comparisons we have faced against last year's sales, we remain confident in the strategic path for Fred's,” Bloom said. “With the key initiatives we have in place to drive future growth and improve profitability, we continue to make bold strategic shifts in our business.”

 

Fred’s has also suspended its guidance for the second half of 2016, which it said was the result of revenue trends and the business’s evolving nature as it optimizes its store fleet and moves to implement initiatives that the company will outline at its analyst day in New York City on Dec. 2. Fred’s said the suspension of its guidance doesn’t impact its confidence in its ability to provide shareholder value, and that it would do so via an enhanced operating platform to be outlined at the analyst day. 

 

Fred’s also said said it would release its November sales and Q3 financial results at the analyst day. The event will begin at 8:30 a.m. and a link to the event will be available on the company’s website under investor relations.