Fred’s Delays Earnings, Annual Report Due to Specialty Pharmacy Unit Sale

By Andy Meek

A couple of hours before Memphis-based discount retailer Fred’s Inc. was due to begin its fourth quarter and fiscal year 2017 earnings presentation for analysts, the company pulled the plug.

Scheduled for Wednesday, April 18, Fred’s has postponed not only the earnings presentation but the release of its annual report. Both have been delayed about two weeks due to a decision Fred’s board of directors made in the fourth quarter to sell the company’s specialty pharmacy business.

To give the company time to finish the necessary accounting reports, the earnings presentation and annual report release are now set for May 4.

A Fred’s spokesman told The Daily News the announcement of a delay related to the sale is not intended to convey that a deal has been reached to sell the specialty pharmacy operations, which is a subset of Fred’s pharmacy business.

“But, rather, because the board of directors has determined to put it up for sale, it will be classified as a discontinued operation, which requires reviewing the financial statements from prior years and separating out the discontinued operations from the remaining core businesses,” the spokesman said. “This process is not quite complete, but should be completed no later than May 4.”

The specialty pharmacy operation is a complimentary service Fred’s offers to patients who’ve been prescribed certain specialty medications. Services and benefits as part of that service include answering questions and informing patients of any handling instructions, administration, monitoring and follow-up care related to the prescriptions.

Fred’s announced in December, in tandem with another quarter’s results showing continued weakness, that the company was looking at alternatives for aspects of its business including its real estate and its specialty pharmacy business, in addition to cancelling its dividend.

Fred’s and its subsidiaries operate almost 600 retail stores and three specialty pharmacy-only locations across 15 states in the southeastern U.S. The company’s share price has also fallen almost 80 percent over the past 12 months.

A commentary out Wednesday morning from Zacks Equity Research notes that slump is largely the result of the company’s “dismal” earnings record, as well as the impact of the cancelled merger between Rite Aid and Walgreens, which “thwarted Fred’s store expansion plans” and kept it mired behind industry leaders like Walgreens and CVS.

In unrelated news and closer to home, meanwhile, there’s a Fred’s connection to a prominent commercial real estate deal that materialized in recent days.

The Commercial Appeal’s parent company Gannett Co. Inc. has sold 5 acres adjacent to its 495 Union Ave. location to a New York-based investment company, Twenty Lakes Holdings, that specializes in acquiring underperforming and underutilized locations from legacy newspapers.

Twenty Lakes Holdings, doing business as 597 Beale Street LLC, bought the parking lot behind the CA building for $1 million. It’s been described in press accounts as an affiliate of Alden Global Capital, which is an investor in Fred’s and whose president and founding member, Heath Freeman, is the chairman of the Fred’s board.