Fred's Seeks Strategic Options After Weak Sales


Shares of Fred's Inc. hit an 8-year high Thursday after the discount retailer said it will seek strategic opportunities and announced a revamp of its merchandising and marketing team after a weak holiday shopping season.

The company did not describe what strategic options it was considering, but said it hired Bank of America Merrill Lynch and Peter J. Solomon Co. in order to "to enhance shareholder value."

In December, Fred's said sales at stores that were open at least a year rose 1.4 percent compared with the same month a year ago. But most of the increase came from its pharmacy department, not from its general merchandise, the company said. Sales at stores open a year is considered a key indicator of a retailer's financial health. It strips away the impact of recently opened or closed stores.

A Black Friday promotion failed to boost earnings in the fourth quarter, Fred's CEO Bruce Efird said. The company said it expects earnings during the quarter to be flat or up modestly from a year ago. Analysts expects earnings of 20 cents per share in the fourth quarter, according to FactSet. The company posted earnings of 18 cents per share in the same quarter a year ago.

Efird said the merchandising and marketing team will now report directly to him. He said the team has come up with new pricing, marketing and other strategies to boost profit over the year.

The company also said that Chief Financial Officer Jerry Shore will also serve as chief operating officer.

Fred's, which is based in Memphis, Tenn., operates 701 discount general merchandise stores in the Southeast. The company has been expanding the number of pharmacies in stores and adding more auto and hardware products on its shelves to boost sales.

Shares of the company rose 56 cents, or 3.2 percent, to $18.32 in afternoon trading Earlier, Fred's shares rose to $19.69, their highest point since July 2005.

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