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Fred's to Shake Things Up in New Prototype

Higher-Margin Items Moved to the Front

Memphis, Tenn. — A new prototype of Fred's Inc. stores that relocates higher-margin product offerings to the front of the unit and edits underperforming product categories will begin rolling out this summer, the company said during its presentation for the William Blair & Co. 25th annual Growth Stock Conference last week.

Starting Aug. 1, three such prototypes will open, followed by another two units by Sept. 1.

This prototype reflects a combination of two existing prototypes — one that features higher-margin goods at the front of the store with lower-margin product shifted to the back. The other has edited assortments, omitting product categories that aren't producing desired sales and contribution per square foot and replacing them with existing products that have been identified as stronger performers, explained James Fennema, executive vice president and general merchandise manager.

The first five of the new brand of prototypes represent “our first to combine the elimination of categories and the movement of merchandise and department,” he continued. “All prototypes are designed to increase sales per square foot and the contribution per square foot. Each prototype focuses on different departments with different margin levels and the placements of those departments. … Because of this, our stores have the ability to increase sales per square foot over the next two years.”

Another major initiative already under way and intended to increase store performance is the retailer's category management improvement program.

Michael Hayes, CEO, said that for the past 18 months, Fred's has been “rewriting and drafting a plan” that will allow its buyers to measure the contribution per square foot of categories, evaluate skus and ultimately determine the best-performing categories.

“One of our challenges is having 200 feet of new product wanting to come into the store,” Hayes explained. “This is the way we see that will give us the ability to keep our stores current, growing and put us in a position to be an exciting place for customers to come.”

In other news, Fred's expects to complete the roll-out of its cooler/freezer program — comprising milk, dairy and frozen foods — by Nov. 1. Most stores will carry 11 doors and smaller units will carry five doors of the equipment for these products. About 25 percent of the roll-out is already complete, the company said.

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