Fred’s Inc. (FRED) reported a 0.2% year-over-year rise in its comparable-store sales (comps) for the month of September 2014. However, it compared unfavorably to an increase of 2.8% in the year-ago period due to ongoing headwinds in the retail environment.
Total sales for the month went up 3.3% to $183.6 million backed by several strategic initiatives adopted to boost its top line. In August, Fred’s started a new marketing plan, including in-store marketing initiatives, focusing on diverse product mix and an aggressive advertisement program.
Fred’s pharmacy department performed well with higher year-over-year comps and sales during the month. The company’s program of clearing its unproductive inventory also yielded results as inventory was substantially lower during the month.
During September, the company closed five full service stores and one Xpress location. As of Oct 4, 2014, Fred's operates 701 discount general merchandise stores, including 21 franchised Fred's stores, in the southeastern United States.
Fred's total sales for the eight month year-to-date period ended Oct 4, 2014 went up 1.5% year over year to $1.32 billion. Comps for the period slipped 0.5% versus an increase of 0.8% in the same period a year ago.
In a recent development, Fred’s inked a multi-year supply agreement with one of the largest healthcare service companies, Cardinal Health Inc. (CAH). Per the deal, Cardinal Health will be the primary supplier of all branded and generic drugs to all of Fred’s’ in-store pharmacies and EIRIS health services after its current agreement expires in fiscal 2015.
The supply agreement is in line with the company’s ongoing strategy of rapid growth in the pharmacy department at retail locations, specialty pharmacies and clinical services. Management expects the agreement to accelerate gross margin improvement in the pharmacy department.,
Fred’s currently carries a Zacks Rank #3 (Hold).
Other Stocks to Consider
Some better-ranked stocks to consider in the apparel industry include Costco Wholesale Corp. (COST) and The TJX Companies Inc. (TJX). All these stocks have a Zacks Rank #2 (Buy).
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