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Fred’s sees comps rise, uncertainty remaining on Walgreen/Rite Aid deal

June 6, 2017

As the entire country awaits the fate of the proposed Walgreens/Rite Aid acquisition, Memphis-based Fred’s continues to focus on its transformation.

Fred’s Inc. just released its May sales, which showed a 3.1 percent year-over-year decrease from $165.2 million to $160.1 million. The company attributed that drop to the closure of 39 underperforming stores that occurred in the first quarter of 2017.

Total comparable store sales, however, saw a 0.8 percent increase for May 2017. In May 2016, comparable store sales had a 0.4 percent decrease compared to the previous year.

Michael K. Bloom, CEO Fred’s, said in a release they were pleased with the May store sales and were continuing to deliver on the company’s 2017 goals.

“We are seeing substantial momentum in our retail and specialty pharmacy businesses, creating opportunities for growth throughout the company,” Bloom said. “In retail pharmacy, adjusted script comps are continuing to trend positively, while in the specialty pharmacy business we are consistently experiencing significant sales growth. We are confident in the ability of our leadership team and the entire Fred’s Pharmacy team to drive further operational improvement as we continue to build on the foundation we’ve laid for future growth and success.”

The size of that future growth is somewhat dependent on whether or not the Federal Trade Commission (FTC) approves or blocks the pending multibillion-dollar acquisition of Rite Aid Corp. by Walgreens Boots Alliance. If approved, Fred’s is poised to acquire up to 1,200 divested Rite Aid stores, which would catapult it from a regional drugstore chain to the third-largest drugstore chain in the U.S.

In the May sales release, Fred’s had a section that addressed the possible deal that said, “Fred’s Pharmacy is working collaboratively with Walgreens Boots Alliance, Rite Aid and the Federal Trade Commission to help obtain the FTC’s approval of Walgreens Boots Alliance’s pending acquisition of Rite Aid and the divestiture of certain Rite Aid assets to Fred’s Pharmacy. Fred’s Pharmacy remains committed to purchasing additional assets, including up to 1,200 Rite Aid stores, to the extent necessary to obtain the FTC’s approval of the transaction. Completion of the transaction is subject to approval by the FTC, as well as other customary regulatory approvals and closing conditions.”

Whether or not the Walgreens/Rite Aid deal will go through is still far from certain. Originally announced in 2015, Walgreens and Rite Aid “certified substantial compliance” for the FTC’s request for additional information in early May. This request was the official second request by the FTC.

With that certified compliance complete, the FTC now has until July 7 to act.

In the meantime, Fred’s continues to carry out its health care strategy as well as build a board of directors and executive leadership who can support the new direction.

Fred’s currently operates 601 pharmacy and general merchandise stores, including 14 franchised Fred’s Pharmacy stores and three specialty pharmacy-only stores.

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