Fred's (FRED) September Comps Fell 4.9%, Versus Expected 2.4% Drop

October 6, 2016 7:46 AM EDT

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Fred's Inc. (NASDAQ: FRED) reported sales for the five-week fiscal month of September and eight-month year-to-date period ended on October 1, 2016.

Fred's total sales for the month decreased 5.5% to $199.9 million from $211.4 million in September 2015. Comparable store sales for the month decreased 4.9% compared with an increase of 4.2% in the year-earlier period. Analysts were looking for a drop of 2.4%.

Fred's total sales for the year-to-date period increased 0.5% to $1.439 billion from $1.432 billion for the same period last year. On a comparable store basis, year-to-date sales decreased 1.5% versus an increase of 1.3% for the year-earlier period.

Commenting on the announcement, Michael K. Bloom, Chief Executive Officer, said, "September sales faced a tough year-over-year comparison. The front store also experienced calendar shifts for federal assistance payments, continued substantial reductions in SNAP payments, and an increased impact related to competitive pricing strategies, particularly in consumables categories. Retail pharmacy performed consistent with recent trends and continued to be pressured by the shift to 90-day prescriptions. On the other hand, specialty pharmacy, while experiencing low-single-digit negative comparable sales due to an industry wide slowdown in Hepatitis C drugs, is continuing its steady consecutive month-over-month growth.

"As we pointed out in our quarterly update last month," Bloom continued, "our key areas of emphasis going forward will be to optimize our store fleet and supply chain, focus on markets where we are strong, and make additional investments in marketing and technology, all to drive growth with discipline. A significant number of our stores are performing well, experiencing positive or at least flat comparable store sales. We have identified our weaker markets and are working to mitigate their business trends. We know we can be the best in the markets we serve, we know our customers' needs, and we know we can deliver access to pharmacy and healthcare services as well as a broad, value-based assortment of products. These are highly differentiating competitive advantages for Fred's, and we know they resonate with our customers."

Bloom noted that the Company's fiscal month of October will end on October 29 this year versus October 31 last year. As a result, last-minute Halloween sales will fall into the November reporting period this year.

Additionally, the Company announced that it will host an investor day in New York City on the morning of Friday, December 2, 2016. The event will be webcasted. Agenda specifics and other details will be available later.

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