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VOL. 131 | NO. 245 | Friday, December 9, 2016

Fred’s Inc. Considering HQ Relocation as It Works to Revamp Business

By Andy Meek

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Memphis-based retailer Fred’s Inc. is studying a few options for relocating its Memphis headquarters at 4300 New Getwell Road, locations that Fred’s CFO Rick Hans told The Daily News are all within a few miles of the current headquarters.

The company is looking at those possibilities as part of a general cost-cutting push that includes closing 40 stores next year, in an attempt to reverse some of the headwinds that have bedeviled the company recently.

Those trends – like soft sales in both the pharmacy and front store, in addition to reduced pharmacy margins – were cited by Fred’s CEO Mike Bloom as reasons for the company’s poor showing during the third quarter.

Fred’s released its third quarter earnings Thursday, Dec. 8, after delaying that release by almost a week. It was an unusual move, and Fred’s then took the even more unusual step of declining to take questions from analysts during its regular earnings call.

The quarter’s news, on the whole, was bad: the company reported a net loss of $38.4 million for the quarter ended Oct. 29, a swing to a loss from the $1.4 million in net income it reported during the year-ago quarter.

“The performance we saw this quarter is not acceptable to myself, the senior leadership team, our board and the entire team here at Fred’s,” Bloom said. “The weakness that we saw in the second quarter continued into the third quarter … I’m 100 percent focused on reversing the negative trends the company has experienced.”

The company kicked off the earnings call with a reference to a “pending transaction,” citing it as the reason there would be no questions taken from analysts. Later, Bloom made an explicit point about such deals, noting that “acquisition and partnership activity will play an integral role to accelerate our growth strategy.”

Looking ahead, he emphasized the company’s continued push to steer resources and attention to the pharmacy side of the business. Fred’s has a heritage as a general discount retailer, he explained, but pointed to “personal health care” as the company’s future.

Executives also talked broadly about making investments over the next year or so in new technology as well as new stores. The company also plans to release a mobile app in the first half of 2017 that it says will enhance the pharmacy experience for patients, giving them the ability to take care of needs like pharmacy refills and get quick access to prescription history.

Fred’s executive vice president Mary Lou Gardner said the company is remodeling stores to help improve traffic. Hans also pointed to the company planning continued investment in supply chain improvements and in IT.

And data is playing an important role in helping the company overcome its challenges, Bloom said.

“We will be closing 40 underperforming stores in the first half of 2017,” he told analysts. “We used a new, sophisticated, data-driven process to assess store performance and more accurately forecast how this will change in the future.”

He contrasted that with the prior management team, which he said used more of a “snapshot-type method” to make such decisions.

“So we have the best view we’ve ever had about what makes a store perform, what the real drivers are and how those can be improved, and what the real potential is over the long term,” Bloom said.

RECORD TOTALS DAY WEEK YEAR
PROPERTY SALES 0 133 1,342
MORTGAGES 0 131 1,047
FORECLOSURE NOTICES 0 19 170
BUILDING PERMITS 28 305 3,056
BANKRUPTCIES 25 98 716
BUSINESS LICENSES 4 26 302
UTILITY CONNECTIONS 0 0 0
MARRIAGE LICENSES 0 0 0