Fred’s pointed to sales improvement in its second quarter, although the drug store retailer’s wider net loss was impacted by the failed acquisition of certain Rite Aid stores.
For the second quarter ended July 29, Fred’s posted a net loss of $29.5 million, or 78 cents per share, versus a net loss of $6.9 million, or 18 cents per share, in the period a year earlier. In the second quarter, Fred’s recorded discrete charges of $30.1 million, or 63 cents per share, associated with its canceled acquisition of certain Rite Aid stores, closure of Fred’s locations and other factors. With those charges excepted, Fred’s net loss was four cents less than an analyst average estimate published by MarketBeat.
Comparable store sales slipped by 0.3% versus the previous second quarter. Net sales were $507.8 million versus $529.5 million in the 2016 period. Operating loss was $28.1 million versus $10.9 million in the prior-year period.
“Our overall comparable store sales represent the best quarterly performance in the past year,” said Michael Bloom, Fred’s CEO. “In addition, EPS and EBITDA, excluding non-operating charges, improved over the prior-year period. We are starting to gain momentum and are seeing progress across the business.”
In addition to improvements in pharmacy operations, Bloom pointed to other advances, for example, in front-of-store, which includes consumables and general merchandise.
“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,” he said. “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.”