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Fred's (FRED) Sluggish Store Sales Keep Investors at Bay
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Fred’s Inc has been going off the rails as the company continues to witness sluggish comparable store sales (comps). Shares of this discount retailer, specializing in general and pharmacy products, has plunged close to 76% in a year against the industry’s gain of 18.6%.
What’s Troubling the Stock?
Fred’s has been carrying out store closures for a while, which has been negatively impacting comps. In fact, declining store traffic led to the closure of 39 stores during first-quarter 2017. Additionally, sale of low productive discontinued inventory and continued increase in generic dispensing rate have been bruising Fred’s comps for a while. Persistent challenges in the front store business and competitive consumable categories have also affected overall sales figures.
Thanks to such downsides, comps dipped 1.2%, 0.3% and 0.8% during the first, second and third quarters, respectively. Also, the top- and bottom-line results declined year on year and lagged estimates in third-quarter fiscal 2017. Incidentally, this Zacks Rank #5 (Strong Sell) company has been reporting bottom-line losses for six straight quarters. In addition to dismal comps, increased promotional activity to drive store traffic has been denting business.
Moreover, the company’s business expansion plans were eclipsed by the cancelled Walgreens Boots Alliance (WBA - Free Report) and Rite Aid Corporation merger in June 2017. If the deal were to materialize, it would have positioned Fred’s as the third-largest drugstore chain in the nation after Walgreens and CVS Health Corporation (CVS - Free Report) . However, obstacles such as antitrust concerns cancelled the deal and kept Fred’s far behind industry leaders.
To the disappointment of investors, management cancelled quarterly cash dividend, alongside third-quarter results. The company expects that the cancelled dividend plan will aid share repurchases. Also, the company will be able to invest in strategic developments to induce efficiency in operations. However, with strategies falling apart and a tumbling pharmacy business, hopes of revival seem low for this drug-store retailer.
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Fred's (FRED) Sluggish Store Sales Keep Investors at Bay
Fred’s Inc has been going off the rails as the company continues to witness sluggish comparable store sales (comps). Shares of this discount retailer, specializing in general and pharmacy products, has plunged close to 76% in a year against the industry’s gain of 18.6%.
What’s Troubling the Stock?
Fred’s has been carrying out store closures for a while, which has been negatively impacting comps. In fact, declining store traffic led to the closure of 39 stores during first-quarter 2017. Additionally, sale of low productive discontinued inventory and continued increase in generic dispensing rate have been bruising Fred’s comps for a while. Persistent challenges in the front store business and competitive consumable categories have also affected overall sales figures.
Thanks to such downsides, comps dipped 1.2%, 0.3% and 0.8% during the first, second and third quarters, respectively. Also, the top- and bottom-line results declined year on year and lagged estimates in third-quarter fiscal 2017. Incidentally, this Zacks Rank #5 (Strong Sell) company has been reporting bottom-line losses for six straight quarters. In addition to dismal comps, increased promotional activity to drive store traffic has been denting business.
Moreover, the company’s business expansion plans were eclipsed by the cancelled Walgreens Boots Alliance (WBA - Free Report) and Rite Aid Corporation merger in June 2017. If the deal were to materialize, it would have positioned Fred’s as the third-largest drugstore chain in the nation after Walgreens and CVS Health Corporation (CVS - Free Report) . However, obstacles such as antitrust concerns cancelled the deal and kept Fred’s far behind industry leaders.
To the disappointment of investors, management cancelled quarterly cash dividend, alongside third-quarter results. The company expects that the cancelled dividend plan will aid share repurchases. Also, the company will be able to invest in strategic developments to induce efficiency in operations. However, with strategies falling apart and a tumbling pharmacy business, hopes of revival seem low for this drug-store retailer.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2018 today >>