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Why You Should Hold onto Fred's (FRED) Stock in 2017
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Shares of Fred’s Inc. have displayed a promising gain of 16% in the past six months, outperforming the Zacks categorized Retail Wholesale industry which has witnessed a gain of 3% in the same time frame, despite facing lower comps since past five months. Although the discount retailer is facing difficult times with respect to comps due to weak performance of the front-store categories as well as shift of preference toward online shopping, Fred’s is expected combat these headwinds with the aid of its strategic initiatives and there is space for this Zacks Rank #3 (Hold) company to rebound in 2017.
The company carries a VGM score of ‘B’ and has an expected earnings growth of 8% in the long term, which also makes it an attractive pick.
Focus on Pharmacy and Expansion Initiative
Fred’s recent agreement with Rite Aid Corporation and Walgreen Corporation (WBA - Free Report) to acquire 865 stores in the Eastern and Western Unites States should position it as the third largest pharmacy retailer in 2017. 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.
Moreover, Fred’s plans to build a pharmacy-focused marketing campaign targeted toward customer acquisition and retention by first-half 2017.
The company is also on track to launch a fully-integrated mobile app during first-half 2017 for the pharmacy category which is likely to considerably enhance the pharmacy shopping experience for patients and increase the ability to refill synchronized medications and get access to prescription history.
Initiatives to Revamp the Front Store
Further, Fred’s is on track to revamp its front-store category. The company has plans to implement a retail-based operational excellence program in 2017 and take a disciplined approach to turn around underperforming stores. Moreover, it plans to engage all major suppliers to expand participation and plans to improve reimbursement rates. The company also plans to manage its inventory levels using store-based on-demand order insight software implemented earlier this year.
Further, Fred’s is in the process of developing a fully-integrated customer loyalty program that offers rewards across the front-store category.
The above mentioned initiatives might revive the stock and help it to turn around in 2017. Moreover, the company expects improved margins in the upcoming year once the generic transition of the pharmacy category is over. Taking the pros and cons into regard, we feel it will be a prudent decision to hold onto the stock for 2017.
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Why You Should Hold onto Fred's (FRED) Stock in 2017
Shares of Fred’s Inc. have displayed a promising gain of 16% in the past six months, outperforming the Zacks categorized Retail Wholesale industry which has witnessed a gain of 3% in the same time frame, despite facing lower comps since past five months. Although the discount retailer is facing difficult times with respect to comps due to weak performance of the front-store categories as well as shift of preference toward online shopping, Fred’s is expected combat these headwinds with the aid of its strategic initiatives and there is space for this Zacks Rank #3 (Hold) company to rebound in 2017.
The company carries a VGM score of ‘B’ and has an expected earnings growth of 8% in the long term, which also makes it an attractive pick.
Focus on Pharmacy and Expansion Initiative
Fred’s recent agreement with Rite Aid Corporation and Walgreen Corporation (WBA - Free Report) to acquire 865 stores in the Eastern and Western Unites States should position it as the third largest pharmacy retailer in 2017. 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.
Moreover, Fred’s plans to build a pharmacy-focused marketing campaign targeted toward customer acquisition and retention by first-half 2017.
The company is also on track to launch a fully-integrated mobile app during first-half 2017 for the pharmacy category which is likely to considerably enhance the pharmacy shopping experience for patients and increase the ability to refill synchronized medications and get access to prescription history.
Initiatives to Revamp the Front Store
Further, Fred’s is on track to revamp its front-store category. The company has plans to implement a retail-based operational excellence program in 2017 and take a disciplined approach to turn around underperforming stores. Moreover, it plans to engage all major suppliers to expand participation and plans to improve reimbursement rates. The company also plans to manage its inventory levels using store-based on-demand order insight software implemented earlier this year.
Further, Fred’s is in the process of developing a fully-integrated customer loyalty program that offers rewards across the front-store category.
The above mentioned initiatives might revive the stock and help it to turn around in 2017. Moreover, the company expects improved margins in the upcoming year once the generic transition of the pharmacy category is over. Taking the pros and cons into regard, we feel it will be a prudent decision to hold onto the stock for 2017.
Other Stocks to Consider
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 Investment Ideas for Long-Term Profit
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>