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Fred’s takes sales hits in April, Q1; adjusts guidance

Memphis – Hindered by ineffective marketing strategies as well as increasing competition, Fred's Inc. suffered sales and comp declines for both April and the first quarter periods.

Total sales for the month, ended May 3, decreased 1.6% to $150.0 million from $152.4 million in April 2013, and comparable store sales were down 2.3% versus a 1.2% increase in the same period last year.

Its hometown auto & hardware department continued to perform well in the month, but these improvements “were not sufficient to offset the sales shortfall in the other general merchandise departments, which experienced negative comparable sales and traffic declines in April,” noted Bruce Efird, ceo.

For the first quarter, sales dipped 0.6% to $498.5 million from $501.5 million, and comps declined 1.9% compared to a 1.3% decrease a year ago.

As Efird explained, Fred’s April sales “reflect the limited success of our legacy marketing strategies in matching up with prevailing intense competitive pressures.”

The company started working with its outside marketing teams and consultants in late January “to uncover new opportunities available to us and adjust our marketing strategies to regain our sales momentum,” he continued.

“Working through extensive research and building a marketing strategy that can be sustained over the long term has taken several months to design, develop and validate. One of the key findings of our research has pointed out that the aggressive use of our new strategy today is likely to be quickly embraced, based on the demographics of our customer base.”

That said, Fred’s now expects its first quarter earnings per share to be in the range of $0.18 to $0.22.

“As we now begin to implement our new marketing strategy, we expect to see its impact beginning in June, when we anticipate a return to positive comparable store sales in the range of 1% to 3%," Efird summed.