Can Strategic Efforts Aid Fred's To Achieve A Turnaround?
Zacks Investment Research | Mar 13, 2018 10:50PM ET
With underperforming stores, cancellation of dividends and continued bottom-line loses, Fred's, Inc.’s (NASDAQ:FRED) troubles have been aggravating and denting its business for a while. However, to cater to consumers’ rapidly changing preferences and sustain market competition, the company has been focusing on pharmacy organization for driving scripts into its stores. Additionally, it has been putting much effort to reduce operating expenses.
Let’s take a look into the factors that have been bruising this discount retailer and discuss the growth plans it has put into place for achieving recovery.
Factors Denting the Stock
Fred’s comps have long been ailing from store closures, thanks to receding store traffic. To top it, comps have also been bearing the brunt of continued increase in generic dispensing rate and sale of low productive discontinued inventory. Persistent challenges in the front store business and competitive consumable categories have also affected overall sales figures. Due to these downsides, comps dipped 1.2%, 0.3% and 0.8% during the first, second and third quarters, respectively. In addition to dismal comps, increased promotional activity to drive store traffic has been denting business. Incidentally, the company has been reporting bottom-line losses for six straight quarters.
Moreover, the company’s business expansion plans were eclipsed by the cancelled Walgreens Boots Alliance (NASDAQ:WBA) and Rite Aid Corporation (NYSE:RAD) 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 (NYSE:CVS) . However, obstacles such as antitrust concerns cancelled the deal and kept Fred’s far behind industry leaders.
To make matters worse, management announced the cancellation of dividend alongside a dismal third quarter results. In combination, all such factors have gravely affected the company’s price performance. The stock has lost 80% in the past year, against the Zacks Investment Research
Get The News You Want
Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.