Yahoo Finance Fred's Sales Up Again in June: Thanks to Specialty Pharmacy - Analyst Blog
Fred’s Inc. FRED has been reporting higher year-over-year sales for the past few months driven by higher sales contribution by the recently acquired EntrustRx specialty pharmacy. The June sales results were no exception. Comparable store sales increased 1.6% comparing favorably with a decline of 0.6% in the year-ago period.
Total sales for the month increased 12% year over year to $212.9 million. Excluding the year-ago contribution of $7.4 million by the closed 56 locations sales increased 16% in the month.
Total sales were in line with management’s guidance. Sales were also aided by a calendar shift in the month. Comps were at the lower end of management’s expectations reflecting softer retail pharmacy script growth.
In Apr 2015, Fred’s acquired EntrustRx specialty pharmacy for approximately $66 million in order to strengthen its specialty pharmacy portfolio. The company expects the acquisition to be accretive to earnings per share in fiscal 2015. (Read more: Fred's Closes Reeves-Sain and EntrustRx Takeover)
Total sales for the five month period in fiscal 2015 increased 6% to $889.1 million. Excluding the year-ago contribution of $35.2 million by the closed 56 locations, sales increased 10%. Comps for the period went up 0.8% as against a decline of 1.3% in the year-ago period.
Pharmacy, pet, auto and hardware continued to perform well backed by Fred’s’ reconfiguration strategy. General merchandise sales showed improvement in June but, on a comparable store basis, remained flat.
During June, Fred's closed one Xpress pharmacy location. We note that the Zacks Rank #3 (Hold) company is geared to increase pharmacy departments in all its stores, keeping in view its substantial contribution to the overall profit. Also, Fred’s embarked on a 3-year reconfiguration plan in fiscal 2012 to focus more on higher-margin categories and move away from the lower-margin consumable segments. The company is remodeling and refreshing its store layout and allocating space to highlight the key revenue-generating categories.
Smaller retailers like Fred’s, The TJX Companies Inc. TJX, Ross Stores Inc. ROST and Guess’ Inc. GES have also witnessed improvement in comps over the past few months backed by overall economic growth. Higher promotions and increasing focus on omni channel retailing as well as e-Commerce have helped the companies to post higher top-line numbers.
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