Fred's recent specialty expansion paying dividends

MEMPHIS, Tenn. — Fred's Super Dollar on Thursday reported $164.7 million in sales for the four weeks ended Aug. 1, representing an increase of 11%. Excluding $5.6 million from last year's July sales related to 57 subsequently closed locations, total sales increased 16% for the month. 

 

Comparable store sales for the month increased 0.7%, the same as in the year-earlier period.

 

“July sales continued to reflect the solid contribution of our recently expanded specialty pharmacy business, which comprised approximately 12% of our total sales for the month,” stated Jerry Shore, Fred's CEO. “July's comparable store sales performance, however, did not meet our internal expectations as we continued to confront strong headwinds in retail pharmacy sales caused by several factors,” he said. “These include an increasing regulation of controlled substances, which indexes higher in our southeast region than in other parts of the country, and a greater uninsured population due to lower-than-average participation in available health insurance alternatives. In addition to the sales impact of these factors, continued pressure on reimbursement rates, especially in the Medicare Part D networks, significantly affected retail pharmacy department gross margins throughout the month and quarter.”

 

Fred's total sales for the second quarter of fiscal year 2015 increased also 11% to $545.2 million. Excluding sales of $19.2 million from stores closed in 2014, total sales increased 16% for the second quarter of 2015. On a comparable store basis, second quarter sales increased 0.9% versus a decline of 0.1% for the year-earlier period.

 

“Our specialty pharmacy business should continue to grow and its profit performance is expected to strengthen further,” Shore added. “In our upcoming second quarter earnings conference call, we plan to provide a mid-year update on these initiatives and will outline our strategy that reflects the work completed by our Pharmacy Committee of the Board of Directors and our consultants, A. T. Kearney, to address the industry-wide changes that are taking place in retail pharmacy.”

 

Through the first half of fiscal 2015, the Company added a net two Xpress pharmacy locations. Fred's also acquired two specialty pharmacy-only locations during the first half of fiscal 2015.