Fred’s has reported slower sales in the month of July and its second quarter.
In the second quarter ended July 30, Fred’s recorded a total sales decline of 3.4% to $527.7 million versus the period last year as comparable store sales decreased 2%. For the fiscal month of July, total sales slipped 7% to $154 million as comps declined 4.6% versus the month in 2015.
Jerry Shore, Fred’s CEO, said, “We are disappointed with the company’s performance in the month of July. Our comparable store sales trended well below plan due to four major factors: The timing of government assistance funds, delivered on the first day of August, shifted the spending of those funds from fiscal July last year to fiscal August this year, resulting in an estimated negative impact on comparable store sales of 1.6%. Our pharmacies were closed in observance of the July 4 holiday, which this year fell on a Monday, the busiest day of the week for the pharmacy department, versus a Saturday last year, the slowest day of the week for pharmacy. We estimate this had a negative impact on comparable store sales of 2.3%. Sales trends were worse than expected in food, beverage, paper and household chemicals as we focused promotional activities around higher-margin categories.
Shore added, “Based primarily on the significant gross profit impact of our sales miss for the second quarter, combined with unexpected ‘direct and indirect remuneration’ or DIR fees assessed during the quarter, we now anticipate reporting a loss for the second quarter in the range of 18 cents to 24 cents per share. We have initiatives underway that will be implemented during the third and fourth quarters to address recent trends in general merchandise and pharmacy. These include new front store businesses, enhancements to our product mix, and an enhanced pharmacy marketing campaign.”
Fred’s operate 651 discount general merchandise stores and three specialty pharmacy-only locations in 15 states in the southeastern United States.