Fred's plans store reformatting

Retail Editor 5, March 29, 2013

Memphis, Tenn. - Fred's Stores is setting out on a three-year reconfiguration project to step up the rollout of traffic-driving in-store pharmacies and boost sales of discretionary products.
During the transition, the retailer expects to alter 12% to 15% of its general merchandise space, executives said during the company's quarterly conference call yesterday. Fred's stores with integrated pharmacies generate above 4% operating profit. About half the company's units currently have pharmacies. The company plans to expand that to 65% to 70% by the end of 2015.
"The goal of these changes is to shift our general merchandise business to a healthier balance between higher gross margins, discretionary product lines and consumables," said Bruce Efird, ceo.
Fred's will begin testing a new destination area centered around hardware, automotive, pet and home, according to Alan Crockett, chief merchandising officer and executive vp of general merchandise. Soft lines - which Fred's defines as apparel and linens - is one of the areas targeted for brand expansion this year.
"The good news is home has started to improve for us in Q1," he added. "We've seen major improvement in home."
For the quarter ended Feb. 2, net income fell 32.6% to $6.6 million, or 18 cents per share. Sales rose 7% to $533.4 million, with comps up 4.8%.
For the fiscal year, net income shrank 11.4% to $33.4 million, or 87 cents per share. Sales increased 4% to $1.955 billion, with comps up 1.1%.

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