Fred’s Inc. FRED reported higher year-over-year sales in Mar 2015 backed by strong sales during Easter. Comparable store sales increased 1.9% in the month comparing favorably with a decline of 1.2% in the year-ago period.
Total sales for the month increased 0.3% year over year to $191.7 million. Sales in March were at the higher end of management’s guidance range of flat to up 0.3% provided during the fourth-quarter fiscal 2014 earnings call. Strong sales of toys, candy, and giftware during Easter contributed to higher sales in the month.
Pharmacy, pet, auto and hardware continued to perform well backed by Fred’s’ reconfiguration strategy. However, spring seasonal and lawn & garden product categories were weak due to West Coast port strike following ongoing labor unrest and unusually wet weather during the month.
Fred’s embarked on a 3-year reconfiguration plan in fiscal 2012 to enhance its focus on higher-margin categories and move away from the lower-margin consumable segments. The company is remodeling and refreshing its store layouts and allocating space to highlight the key revenue-generating categories. Moreover, the company is geared to increase pharmacy departments in all its stores, keeping in view its substantial contribution to the overall profit.
Additionally, Fred’s is working toward closing the recently announced acquisition of EntustRx specialty pharmacy operation and Reeves-Sain Drug Store. Last month, the company announced that it has inked an agreement to acquire Reeves-Sain Drug Store, Inc., a private specialty and retail pharmacy company, based in the greater Nashville, TN area. The acquisition is expected to expand its presence in the specialty pharmacy sector. (Read: Fred's to Buy Reeves-Sain Drug Store Including EntrustRx)
Stocks to Consider
Fred's currently carries a Zacks Rank #3 (Hold). Some better-ranked stocks in the retail sector include Gordmans Stores Inc. GMAN, Burlington Stores Inc. BURL and Ross Stores Inc. ROST. While Gordmans sports a Zacks Rank #1 (Strong Buy), Burlington and Ross Stores have a Zacks Rank #2 (Buy).
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