Fred's Pharmacy turnaround is well underway

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Fred's Pharmacy turnaround is well underway

By Gina Acosta - 09/06/2017

The strategic transformation of Fred's Pharmacy seems to be gaining steam as the Memphis-based chain posted improvements in sales trends and named a new chairman.

Despite a net loss of $29.5 million for the second quarter ended July 29, Fred's said same store sales fell 0.3 percent in Q2 2017 — an improvement from the 2 percent decline in Q2 2016. Net sales were $507.8 million, which was a 4.1 percent drop from the $529.5 million in Q2 2016.

“Our overall comparable store sales represent the best quarterly performance in the past year," Michael K. Bloom, Chief Executive Officer, said. "Our Retail Pharmacy business continues to improve, delivering flat comp scripts year-to-date adjusted for 90 days, and increases in our Generic Dispensing Rate and our overall gross profit dollars per script. In Specialty Pharmacy, we continue to drive sales growth through geographic expansion into new markets and diversification within our existing therapies. Despite ongoing headwinds in Consumables in the Front Store, we experienced a 60 basis point improvement in comparable sales in our General Merchandise division over the same quarter last year.”

The retailer also announced that Heath Freeman, president of Alden Global Capital LLC, would assume the role of chairman of the Fred’s board of directors. Alden is the largest Fred’s shareholder.

For the first six months of 2017, Fred's total net loss was $66 million. Legal fees and other expenses associated with the potential acquisition of Rite Aid stores — which fell through in June — as well as the implementation of Fred’s growth strategy accounted for the bulk of the net loss at $32.1 million.

“While we are encouraged by our progress and performance trends, we recognize there is more work to be done. Our work over the past few quarters, including investing in technology, people and processes, was integral to stabilizing our infrastructure and creating a foundation to build upon. Our turnaround strategy is now expanded to focus on reducing SG&A and driving free cash flow. By lowering our SG&A to be more in line with our peers and embracing our roots of succeeding in small to mid-sized rural markets where we have a track-record of generating free cash flow, we are well-positioned to grow our bottom line and enhance shareholder value,” Bloom added.

Fred’s Pharmacy is headquartered in Memphis and operates 600 pharmacy and general merchandise stores.