Memphis-based discount-store operator Fred's Inc. said Thursday that a key revenue figure fell 3.8 percent in September, hurt by a shift of drug sales from name brand to generic in its pharmacy department.
Analysts expected a smaller 1.8 percent drop in revenue in stores open at least one year, according to Thomson Reuters. The measure is important to retailers because it excludes sales from new stores and stores that have closed recently.
Total sales for the five weeks ended Sept. 29 rose 1 percent to $170.9 million.
"The impact of generic pricing on the major brand conversions was dramatic," said CEO Bruce Efird.
Usually, market changes occur over six to nine months, but this conversion happened at a more rapid pace, involving a period of only 30 to 45 days.
Lower tobacco sales also hurt results. Pet products, hardware and food were stronger categories.
Year-to-date, revenue in stores open at least one year fell 1.2 percent and total revenue rose 3 percent to $1.28 billion.
Fred's operates about 700 discount stores in the Southeast.
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