Pharmacy makes the difference for Fred's

MEMPHIS, Tenn. Pharmacy continues to be one of the key differentiators for small-box discounter Fred’s, especially against other small-box discounters.

The chain may have posted net sales of $434.2 million, down 3% for its second ended Aug. 1, but pharmacy sales as a percentage of overall sales were up 210 basis points to 32.8% as compared to the second quarter last year.

“One of our top priorities continues to be leveraging pharmacy operations at a competitive advantage over our small box discount competitors,” Fred’s CEO Bruce Efird told analysts Thursday morning. “Our pharmacy team delivered solid script count growth in the quarter,” he said.

Efird stated that Fred’s would continue to invest in its pharmacy operations through prescription file buys and acquisitions.The chain’s Prescription Plus card program realized an 86% increase in enrollment, Efird said, and now includes more than 75,000 customers as members. “Our marketing launch of Prescription Plus begins in September with in-store marketing, radio and outdoor media,” Efird said.

That Prescription Plus program is especially key in battling the generic-discount program launched by the likes of Walmart. Approximately 14% of all prescriptions dispensed by Fred’s pharmacists are to cash-paying customers. And those cash-payors represent approximately 8% of Fred’s pharmacy sales.

“When we look at it compared to our industry peers, we’re probably more cash-driven than a lot of our larger-box [competitors],” commented Fred’s EVP pharmacy operations Rick Chambers, explaining why generic competition from Walmart may be more significant to Fred’s than maybe others.

Fred’s strong position in pharmacy is expected to raise the chain’s profile throughout the southeast along with the rising concern around the novel H1N1 virus. Fred’s is currently in discussion with health departments at all levels — national, state and local — and those conversations have so far been positive, Chambers reported. “With our rural footprint, we serve a very good niche or need there with that distribution channel [for H1N1 vaccine],” he said. “We’re also working to increase the number of immunizers that we have in our pharmacies. And if we have areas where we don’t have a certified immunizer, we’re looking to contract with outside services to fill that need and be there for the patient.”

Across its relative over-the-counter offerings, hand sanitizer for example, Fred’s has been working closely with its vendor community to ensure optimal inventory levels.

Fred's opened seven new pharmacies and three new express pharmacy locations in the second quarter, and plans to open between 9 and 15 new pharmacies in 2009.