Fred's Pharmacy is in turnaround mode
Fred’s Pharmacy is evaluating options for its retail pharmacy portfolio and “actively pursuing a sale” of its specialty pharmacy business as it looks to turn around its business.
During its fourth quarter earnings report, Fred’s Interim CEO, Joseph Anto said: “I’m excited to say we are now executing a turnaround plan to accomplish two main goals: eliminating our debt and generating significant positive EBITDA and free cash flow, on a run rate basis, by Q4 of FY 2018. Our plan is focused on five key areas: strategic transactions, optimizing our cost structure and capital allocation, talent acquisition, revenue & margin initiatives and assortment optimization. Some of the strategic transactions we are actively pursuing include a sale of our specialty pharmacy business and portions of our vast real estate portfolio. In addition, we are evaluating various options for our retail pharmacy portfolio."
The news comes after Antos last week replaced Michael Bloom, who resigned as CEO to “pursue other opportunities.” Bloom became CEO in 2016 when the company began to focus on health care, hiring new executives and investing heavily in both retail pharmacy and specialty pharmacy.
"We’ve made significant progress on the expense side of our business, having identified $30-$40 million in operating cost reductions for FY 2018, and our work in this area is far from over. We are bringing new talent into every part of the organization, including store operations, supply chain, private brands, finance and real estate. Additionally, we have multiple initiatives focused on driving revenue and gross margin in the front store and we continue to actively manage and reduce our SKU count in order to optimize our assortment,” Antos said.
During the fourth quarter of 2017, Fred’s Board of Directors approved a plan to actively market its specialty pharmacy business for sale. As a result of this decision, Fred’s reclassified the specialty pharmacy business from continuing operations to discontinued operations.
For the fourth quarter ended Feb. 3, Fred's said net sales were up 2.1% to $477.3 million, which included 14 weeks of activity compared to 13 weeks last year. Same store sales decreased 0.9%. Net loss was $22.6 million, or 62 cents per share, compared to a loss of $21.7 million, or 58 cents per share in the prior year quarter.
Fred’s, Inc. operates approximately 600 general merchandise and pharmacy stores, including 12 franchised locations, and three specialty pharmacy-only locations.