We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Fred's Inc's (FRED) Expansion Bodes Well: Should You Hold?
Read MoreHide Full Article
'Every Cloud Has A Silver Lining' – the saying seems to ring true for discount retailer Fred’s Inc. at the moment. The company is finally on growth track after a torrid few months. The move came on the back of the expansion agreement Fred’s announced under which it plans to more than double its footprint in the Eastern and Western Unites States, consequently attracting investor attention. The news was of great interest to investors and the share price soared almost 82% on Dec 20, 2016. The change brought about by this event aided Fred’s shares rebound, as it has been growing by over 100% since the past one month, outperforming the Zacks categorized Retail-Discount & Variety industry by a staggering margin which witnessed a decline of 1.5%, in the same time frame.
The tables turned on Dec 20, 2016 when the company announced that it had entered into an agreement with Rite Aid Corporation and Walgreens Boots Alliance, Inc. (WBA - Free Report) to buy 865 stores located in the Eastern and Western Unites States along with certain assets that are required for store operations. The deal is worth $950 million in cash. The takeover of these stores in key market areas, will position Fred’s as the third-largest drugstore chain in the U.S. The company operated 647 discount general merchandise stores and three specialty pharmacy-only locations in 15 states in the southeastern United States including 18 franchised locations as of Oct 29, 2016. The newly added stores will more than double Fred’s store count and boost urban presence post takeover.
However, we observed that Fred’s share price had declined almost 31.9% till Dec 19, 2016, just before the announcment of the deal, and had also underperformed the Zacks categorized Retail-Discount & Variety industry which had witnessed a gain of 5.6%. Fred’s had been going through difficult times since the past five months, evident from its lower comps mainly due to weak performance of the front store categories as well as shift of preference towards online shopping. Moreover, the company’s margins have been under pressure due to lower average selling price in the specialty pharmacy department
The takeover might aid Fred's to counter its difficulties and hence it is prudent for investors to hold the Zacks Rank #3 (Hold) company for now.
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>
Unique Zacks Analysis of Your Chosen Ticker
Pick one free report - opportunity may be withdrawn at any time
Image: Bigstock
Fred's Inc's (FRED) Expansion Bodes Well: Should You Hold?
'Every Cloud Has A Silver Lining' – the saying seems to ring true for discount retailer Fred’s Inc. at the moment. The company is finally on growth track after a torrid few months. The move came on the back of the expansion agreement Fred’s announced under which it plans to more than double its footprint in the Eastern and Western Unites States, consequently attracting investor attention. The news was of great interest to investors and the share price soared almost 82% on Dec 20, 2016. The change brought about by this event aided Fred’s shares rebound, as it has been growing by over 100% since the past one month, outperforming the Zacks categorized Retail-Discount & Variety industry by a staggering margin which witnessed a decline of 1.5%, in the same time frame.
The tables turned on Dec 20, 2016 when the company announced that it had entered into an agreement with Rite Aid Corporation and Walgreens Boots Alliance, Inc. (WBA - Free Report) to buy 865 stores located in the Eastern and Western Unites States along with certain assets that are required for store operations. The deal is worth $950 million in cash. The takeover of these stores in key market areas, will position Fred’s as the third-largest drugstore chain in the U.S. The company operated 647 discount general merchandise stores and three specialty pharmacy-only locations in 15 states in the southeastern United States including 18 franchised locations as of Oct 29, 2016. The newly added stores will more than double Fred’s store count and boost urban presence post takeover.
However, we observed that Fred’s share price had declined almost 31.9% till Dec 19, 2016, just before the announcment of the deal, and had also underperformed the Zacks categorized Retail-Discount & Variety industry which had witnessed a gain of 5.6%. Fred’s had been going through difficult times since the past five months, evident from its lower comps mainly due to weak performance of the front store categories as well as shift of preference towards online shopping. Moreover, the company’s margins have been under pressure due to lower average selling price in the specialty pharmacy department
The takeover might aid Fred's to counter its difficulties and hence it is prudent for investors to hold the Zacks Rank #3 (Hold) company for now.
Stock Pick
A better-ranked stock in the same sector is Burlington Stores Inc. (BURL - Free Report) . Burlington Stores sports a Zacks Rank #1 (Strong Buy) and has an expected earnings growth rate of 19.9%. You can see the complete list of today’s Zacks #1 Rank stocks here.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest tickers for the entirety of 2017?
Who wouldn't? These 10 are painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. They are our primary picks to buy and hold. Be among the very first to see them >>