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fred’s Pharmacy Appoints Two New Independent Directors

Fred’s Pharmacy Appoints Two New Independent Directors

Announces Cooperation Agreement with Alden Global Capital, Fred’s Largest Shareholder

Fred’s Leadership Team Is Poised to Continue Transforming Company and Maximizing Free Cash Flow Per Share

MEMPHIS, Tenn.—April 24, 2017–Fred’s, Inc. (“Fred’s Pharmacy” or the “Company”) (NASDAQ:FRED) today announced that it has appointed Steven B. Rossi, Chief Executive Officer of Digital First Media, and Timothy A. Barton, former CEO of Freightquote.com, which he founded in 1998, to its Board of Directors, effective immediately.

Today’s announcement follows the recent additions of Linda Longo-Kazanova, Christopher W. Bodine, Peter J. Bocian and Michael K. Bloom, Chief Executive Officer, to the Fred’s Pharmacy Board. As a result of these announcements, following the conclusion of the 2017 Annual Meeting of Shareholders the newly reconstituted Board will be comprised of 9 directors, 8 of whom are independent and all of whom have track records of delivering shareholder value.

Mr. Rossi and Mr. Barton have been added to the Fred’s Pharmacy Board in connection with a Cooperation Agreement between Alden Global Capital LLC (“Alden”), the Company’s largest shareholder, and Fred’s Pharmacy. The Cooperation Agreement contains terms regarding the parties working together for the long-term success of Fred’s Pharmacy.

“We are excited to welcome Steve and Tim to the Fred’s Pharmacy Board of Directors,” said Thomas H. Tashjian, Chairman of the Board. “They add strong business, financial and operational expertise, and their perspectives will be instrumental as we continue the transformation of Fred’s Pharmacy. This includes moving expeditiously to complete the transaction with Walgreens and Rite Aid, pending approval by the Federal Trade Commission, which would make Fred’s Pharmacy the third largest drugstore chain in the nation. We look forward to continuing to work constructively with Alden and all of our shareholders as we focus on executing our strategic plan and delivering value for all Fred’s Pharmacy stakeholders.”

Mr. Bloom said, “I am thrilled to work with Steve, Tim, Alden and the entire Fred’s Pharmacy Board to capture the numerous value-creating opportunities that lie ahead for the Company. I am confident we have the right team in place to advance our new healthcare-focused strategy and drive returns for our shareholders while delivering on our mission to improve the lives of our patients and customers.”

Heath Freeman, President of Alden, commented, “I am pleased with today’s announcement and expect that Tim and Steve will immediately impact and contribute to the Fred’s Board. I, and the rest of the Alden team, look forward to working with Fred’s as we all continue to support and strengthen Fred’s business. Over the past few months, our team has spent considerable time with the Fred’s Pharmacy team. Having seen first-hand the progress that Mike Bloom and his team have made on the execution of the Company’s healthcare strategy, I have great confidence in the future of the business. With the right focus, Fred’s can generate significant free cash flow per share at the existing business; the pending Rite Aid transaction will provide extraordinary growth to Fred’s business and free cash flow.”

“Fred’s Pharmacy is executing on a transformation plan that is gaining momentum,” said Mr. Rossi. “I look forward to helping Fred’s Pharmacy with its compelling opportunities ahead.”

“I am honored to join the talented individuals on the Fred’s Pharmacy Board,” said Mr. Barton. “With its focused mission and first-class management team, I am confident the Company has a bright future.”

Under the terms of the Cooperation Agreement, Alden is subject to certain customary standstill and other provisions. The complete agreement between Fred’s Pharmacy and Alden will be included as an exhibit to a Current Report on Form 8-K, which will be filed with the Securities and Exchange Commission.

Evercore is serving as financial advisor to Fred’s. Vinson & Elkins LLP and Baker Donelson Bearman Caldwell & Berkowitz P.C. are serving as legal advisors to Fred’s. Olshan Frome Wolosky LLP is serving as Alden’s legal advisor.

Steven B. Rossi
Steve Rossi brings to the Fred’s Pharmacy Board extensive financial and operations experience. Mr. Rossi is the Chief Executive Officer of Digital First Media, which has more than 300 print and digital products serving over 45 million Americans each month. He previously served as the company’s Chief Operating Officer. Prior to joining the company, Mr. Rossi held several successive management positions over 19 years with Knight Ridder Inc., including Chief Financial Officer, Senior Vice President of Operations and President of the Newspaper Division.

Timothy A. Barton
Tim Barton joins the Board with a substantial business and technology background and with experience in growing successful companies. Mr. Barton founded Freightquote in 1998, growing it into the largest online freight shipping provider in the United States with $600 million in annual revenue. Mr. Barton served as Chairman and CEO until the company’s sale to C.H. Robinson Worldwide in 2015. Prior to founding Freightquote.com, Mr. Barton was the Co-Founder and President of UWI Association Programs, which grew into Network Long Distance before being acquired by IXC Communications/Broadwing in 1998.

About Alden Global Capital LLC
Alden is a New York based investment firm focused on deep value, catalyst driven investing.

About Fred’s Pharmacy
Tracing its history back to an original store in Coldwater, Mississippi, opened in 1947, today Fred’s Pharmacy is headquartered in Memphis, Tennessee, and operates 601 pharmacy and general merchandise stores and three specialty pharmacy-only locations, including 14 franchised Fred’s Pharmacy locations. With a unique store format and strategy that combines the best elements of a healthcare-focused drug store with a value-focused retailer, Fred’s Pharmacy stores offer more than 12,000 frequently purchased items that address the healthcare and everyday needs of its customers and patients. This includes nationally recognized brands, proprietary Fred’s Pharmacy label products, and a full range of value-priced selections. The company has two distribution centers, one in Memphis, Tennessee, and Dublin, Georgia.

As previously announced, on December 20, 2016, Fred’s Pharmacy announced that it signed an agreement with Walgreens Boots Alliance, Inc. (NASDAQ: WBA) and Rite Aid Corporation (NYSE: RAD) to purchase 865 stores and certain assets related to store operations located across the eastern and western United States for $950 million in cash. Closing of the transaction is conditioned on the completion of Walgreens Boots Alliance’s proposed acquisition of Rite Aid, approval by the Federal Trade Commission, as well as customary regulatory approvals and closing conditions.

For more information about the Company, visit Fred’s website at www.fredsinc.com.

Forward Looking Statements
Comments in this news release that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. A reader can identify forward-looking statements because they are not limited to historical facts or they use such words as “outlook,” “guidance,” “may,” “should,” “could,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “forecast,” “goal,” “intend,” “committed,” “continue,” or “will likely result” and similar expressions that concern the Company’s strategy, plans, intentions or beliefs about future occurrences or results. These risks and uncertainties include, but are not limited to, those associated with the Company’s announced strategic plan, the success of announced acquisition activities and future growth trends in businesses acquired; general economic trends; risks related to the possibility that the transactions may not close, including because one or more closing conditions to the transactions, including certain regulatory approvals, may not be satisfied or waived, on a timely basis or otherwise, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transactions, or may require conditions, limitations or restrictions in connection with such approvals; the risk that the businesses and acquired stores, as applicable, will not be integrated successfully; the risk of litigation and/or regulatory actions related to the proposed transaction; changes in consumer demand or purchase patterns; delays or interruptions in the flow of merchandise between the Company’s distribution centers and its stores or between the Company’s suppliers and same; a disruption in the Company’s data processing services; cyber-security threats; costs and delays in acquiring or developing new store sites; and the factors listed under “Risk Factors” in the Company’s most recent Annual Report on Form 10-K and any subsequent quarterly filings on Form 10-Q filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date made. The Company undertakes no obligation to release revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.

Fred’s Pharmacy
Rick Hans, 901-362-3733, Ext. 2232
Executive Vice President, Chief Financial Officer and Secretary
or
Joele Frank , Wilkinson Brimmer Katcher
Ed Trissel / Steve Frankel / Dan Moore
212-355-4449  read more

fred’s Reports Fourth Quarter, Full Fiscal Year 2016 Results and March Sales

Strong sequential bottom-line improvement from third quarter 2016; Expect sequential improvement to continue through 2017

Substantial progress in 2016 implementing new healthcare strategy

Invested in experienced talent, process, technology and infrastructure to build foundation for long-term growth, profitability and shareholder value

March comparable store sales decreased 0.5%

Announced the transformative acquisition of 865 Rite Aid stores, which would make Fred’s Pharmacy the third largest drugstore chain in the nation, pending FTC approval

MEMPHIS, Tenn. (BUSINESS WIRE) – Fred’s, Inc. (NASDAQ: FRED) today reported financial results for the fourth quarter and year ended January 28, 2017, as well as sales for the five-week fiscal month ended April 1, 2017.

Commenting on today’s results, Michael K. Bloom, Chief Executive Officer, said, “Over the last several months we have started to recognize the positive impact of the initiatives we began implementing in 2016. We are now seeing bottom-line improvement driven by sequential growth in Retail Pharmacy adjusted script comps, sequential progress in sales trends in our Specialty Pharmacy business, Front Store margin expansion and strong holiday seasonal category sales. We are pleased to report that our comprehensive strategy and plan to improve our performance is on target. Notably, we have rolled out a series of initiatives that will continue to lay the foundation for Fred’s Pharmacy’s success. We are upgrading talent; investing in technology; diversifying our specialty pharmacy portfolio; improving the patient and customer experience; increasing supply chain efficiencies; expanding margins; and optimizing assets to improve performance and cash flow.”

Mr. Bloom continued, “While we are pleased with the progress we’ve made in such a short time, we encountered headwinds that contributed to particularly challenging second and third quarters. We began to reap the benefits of our strategic initiatives in the fourth quarter as evidenced by our strong sequential improvement. We expect the positive trends we experienced in the fourth quarter to continue. Looking at the organization as a whole, we expect to see continued sequential bottom-line improvement in 2017 as the initiatives underway take hold. We are keenly focused on positioning the Company for long-term growth and enhancing value for our shareholders.”

Fourth Quarter 2016 Results

For the fourth quarter of 2016, Fred’s recorded a net loss of approximately $22.5 million or $0.60 per share. During the fourth quarter, the Company recorded charges totaling $23.4 million, or $0.49 per share after tax during the quarter, including:

• $9.3 million or $0.25 per share after tax for a valuation allowance against the Company’s deferred tax asset resulting from the pretax loss created primarily by the following charges in the fourth quarter;
• $10.2 million on a pretax basis or $0.17 per share after tax for professional and legal advisory fees incurred in connection with the proposed acquisition of 865 Rite Aid Corporation (“Rite Aid”) stores and the development and implementation of the Company’s growth strategy;
• $1.5 million on a pretax basis or $0.03 per share after tax for fees incurred from an assessment received from Visa related to the 2015 data security incident;
• $1.3 million on a pretax basis or $0.02 per share after tax for other non-recurring items; and
• $1.1 million on a pretax basis or $0.02 per share after tax for inventory write-downs related to the closing of 40 underperforming stores.

The fourth quarter net loss of approximately $22.5 million or $0.60 per share compared with a net loss of $3.9 million or $0.11 per share for the fourth quarter of 2015.

Fred’s net sales for the fourth quarter of fiscal 2016 decreased 4.5% to $529.7 million from $554.6 million for the fourth quarter last year. Comparable store sales for the quarter decreased 3.6% versus a 1.7% increase in comparable store sales in the fourth quarter of last year. Comparable store sales in the fourth quarter of 2016 included a negative 2.6% impact as a result of the sale of low productive discontinued inventory versus the fourth quarter of 2015.

Fred’s gross profit for the fourth quarter of 2016 decreased 2.5% to $129.6 million from $132.9 million in the prior year period. Gross profit margin for the quarter increased 50 basis points to 24.5% from 24.0% in the same quarter last year. The margin includes a $3.1 million benefit on a pretax basis or $0.05 per share after tax resulting from the successful sale of discontinued inventory above estimated marked down cost. Fred’s recorded LIFO adjustments of $2.0 million in the fourth quarter of 2016 compared with $4.0 million in the same quarter last year.

Selling, general and administrative expenses for the quarter, including depreciation and amortization, increased 380 basis points to 28.7% of sales from 24.9% of sales in the prior-year quarter. Much of the increase in expenses was attributable to professional, legal, banking and integration planning fees incurred in connection with the announced agreement to acquire Rite Aid stores, as well as impairment charges related to store closures, corporate office and other assets.

Operating loss, which is equivalent to earnings before interest and taxes, or EBIT, a non-GAAP financial measure, was $22.2 million versus a $5.1 million loss in the fourth quarter of 2015.

EBITDA, a non-GAAP financial measure that further excludes depreciation and amortization from EBIT, was a loss of $10.5 million or 2.0% of sales compared with earnings of $6.8 million or 1.2% of sales for the fourth quarter of 2015.

Fiscal Year 2016 Results

For fiscal year 2016, Fred’s net loss totaled $66.5 million or $1.80 per share compared with a net loss of $7.4 million or $0.20 per share for fiscal year 2015.

The Company recorded charges totaling $61.8 million, or $1.28 per share after tax during the fiscal year, including:

• $20.3 million or $0.55 per share after tax for a valuation allowance against the Company’s deferred tax asset resulting from the pretax loss created primarily by the following charges in the fiscal year.
• $13.0 million on a pretax basis or $0.23 per share after tax for the write down of discontinued unproductive inventory;
• $12.3 million on a pretax basis or $0.22 per share after tax for professional and legal advisory fees incurred in connection with the proposed acquisition of 865 Rite-Aid stores and the development and implementation of the Company’s growth strategy;
• $8.6 million on a pretax basis or $0.15 per share after tax for fixed asset impairments and inventory write-downs related to the closing of 40 underperforming stores;
• $3.1 million on a pretax basis or $0.05 per share after tax for fixed asset impairments related to the corporate headquarters;
• $1.5 million on a pretax basis or $0.03 per share after tax for fees incurred from an assessment received from Visa related to the 2015 data breach; and
• $3.0 million on a pretax basis or $0.05 per share after tax for other non-recurring items;

Fred’s net sales for fiscal 2016 decreased 1.2% to $2.13 billion from $2.15 billion. On a comparable store basis, fiscal 2016 sales decreased 2.2%. Comparable store sales for the year included a negative 1.7% impact as a result of the sale of low productive discontinued inventory versus the prior year.

Comparable prescriptions, adjusted for 30 days, increased 30 basis points in 2016 as compared to 2015, and our generic dispensing rate increased by 120 basis points continuing our focus on more profitable scripts.

Gross profit for fiscal year 2016 decreased 6.2% to $510.3 million from $544.2 million the year before. Gross margin for fiscal year 2016 decreased 130 basis points to 24.0% of sales compared with 25.3% in the prior-year period. Most of the decrease was related to inventory write-downs during 2016 associated with store closures and discontinued unproductive inventory. In fiscal year 2016, Fred’s recorded LIFO adjustments of $5.1 million compared with $7.6 million last year.

In fiscal year 2016, selling, general and administrative expenses, including depreciation and amortization, increased 170 basis points to 27.5% compared with 25.8% of sales in fiscal year 2015. Similar to the fourth quarter, for the year the majority of the increase in expenses was related to professional, legal, banking and integration planning fees incurred in connection with the announced agreement to acquire Rite Aid stores, as well as impairment charges related to store closures, corporate office and other assets.

Operating loss for fiscal year 2016 was $74.7 million or 3.5% of sales compared with a loss of $10.4 million or 0.5% of sales in fiscal year 2015.

For fiscal year 2016, EBITDA was a loss of $27.7 million or 1.3% of sales compared with EBITDA of $35.3 million or 1.6% of sales in fiscal year 2015.

March 2017 Sales

The Company also reported sales for the five-week fiscal month ended April 1, 2017. Fred’s total sales for the month decreased 2.7% to $208.6 million from $214.3 million in March 2016. Comparable store sales for March decreased 0.5% versus an increase of 1.8% in the year-earlier month. The March 2017 comparable store sales reflected the benefit of tax refunds, which were delayed from February to March, but were offset by a later Easter (April 16 this year versus March 27 last year), shifting holiday sales into April.

The Rite Aid Transaction

On December 20, 2016, the Company announced that it signed an agreement with Walgreens Boots Alliance, Inc. and Rite Aid to purchase 865 stores for $950 million in cash. Fred’s Pharmacy is working collaboratively with Walgreens Boots Alliance, Rite Aid and the Federal Trade Commission (“FTC”) to help obtain the FTC’s approval of Walgreen Boots Alliance’s pending acquisition of Rite Aid and the divestiture of certain Rite Aid assets to Fred’s Pharmacy. Fred’s Pharmacy remains committed to purchasing additional assets, including up to 1,200 Rite Aid stores, to the extent necessary to obtain the FTC’s approval of the transaction. Completion of the transaction is subject to approval by the FTC, as well as other customary regulatory approvals and closing conditions.

The proposed acquisition of the stores, which are based in highly attractive markets, is a transformative event that will add substantial scale to the Company and transform Fred’s Pharmacy, the largest regional pharmacy player, into an even stronger competitor and the third-largest drugstore chain in the nation. The transaction will accelerate the Company’s healthcare growth strategy, generating considerable benefits for our customers, patients, payors, supplier partners, team members and shareholders.

Webcast Information

A public, listen-only simulcast and replay of Fred’s fourth quarter and full-year 2016 conference call may be accessed at the Company’s web site. The simulcast will begin at 8:00 a.m. Eastern Time today; a replay of the call will be available beginning two hours after the conclusion of the live call and will remain available through May 6, 2017.

Non-GAAP Financial Measures

The Company’s management believes that the disclosure of operating income (EBIT) and EBITDA provides useful information to investors because the measures present an alternative and more relevant method for measuring the Company’s results of operations and financial condition, and, when viewed together with the Company’s GAAP results and the accompanying reconciliations, provides a more complete understanding of the factors and trends affecting the Company than the GAAP results alone. Additionally, EBITDA is a common alternative measure of financial performance used by investors, financial analysts, and rating agencies. These groups use EBITDA, along with other measures, to estimate the value of a company and to compare the operating performance of a company to others in its industry. A reconciliation of these non-GAAP financial measures to their most directly comparable GAAP measure appears in the financial tables attached to this news release.

Forward Looking Statements

Comments in this news release that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. A reader can identify forward-looking statements because they are not limited to historical facts or they use such words as “outlook,” “guidance,” “may,” “should,” “could,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “forecast,” “goal,” “intend,” “committed,” “continue,” or “will likely result” and similar expressions that concern the Company’s strategy, plans, intentions or beliefs about future occurrences or results. These risks and uncertainties include, but are not limited to, those associated with the Company’s announced strategic plan, the success of announced acquisition activities and future growth trends in businesses acquired; general economic trends; risks related to the possibility that the transactions may not close, including because one or more closing conditions to the transactions, including certain regulatory approvals, may not be satisfied or waived, on a timely basis or otherwise, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transactions, or may require conditions, limitations or restrictions in connection with such approvals; the risk that the businesses and acquired stores, as applicable, will not be integrated successfully; the risk of litigation and/or regulatory actions related to the proposed transaction; changes in consumer demand or purchase patterns; delays or interruptions in the flow of merchandise between the Company’s distribution centers and its stores or between the Company’s suppliers and same; a disruption in the Company’s data processing services; cyber-security threats; costs and delays in acquiring or developing new store sites; and the factors listed under “Risk Factors” in the Company’s most recent Annual Report on Form 10-K and any subsequent quarterly filings on Form 10-Q filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date made. The Company undertakes no obligation to release revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.

About Fred’s Pharmacy

Tracing its history back to an original store in Coldwater, Mississippi, opened in 1947, today Fred’s Pharmacy is headquartered in Memphis, Tennessee, and operates 601 pharmacy and general merchandise stores and three specialty pharmacy-only locations, including 14 franchised Fred’s Pharmacy locations. With a unique store format and strategy that combines the best elements of a healthcare-focused drug store with a value-focused retailer, Fred’s Pharmacy stores offer more than 12,000 frequently purchased items that address the healthcare and everyday needs of its customers and patients. This includes nationally recognized brands, proprietary Fred’s Pharmacy label products, and a full range of value-priced selections. The company has two distribution centers, one in Memphis, Tennessee, and Dublin, Georgia.

For more information about the Company, visit Fred’s website at www.fredsinc.com.

Contacts
Fred’s Pharmacy
Rick Hans, 901-238-2232
Executive Vice President, Chief Financial Officer and Secretary
or
Joele Frank, Wilkinson Brimmer Katcher
Ed Trissel / Steve Frankel / Dan Moore
212-355-4449

FRED’S, INC.
Reconciliation of Unaudited Net Income to EBITDA
A Non-GAAP Financial Measure
(In thousands)

13 Weeks EndedJanuary 28, 2017 13 Weeks EndedJanuary 30, 2016 52 Weeks EndedJanuary 28, 2017 52 Weeks EndedJanuary 30, 2016
Net loss $        (22.5) $          (3.9) $        (66.5) $          (7.4)

Interest expense

0.6 0.4 2.3 1.4
Income tax benefit (0.3) (1.6) (10.5) (4.4)
Operating loss / EBIT (22.2) (5.1) (74.7) (10.4)
Depreciation and amortization 11.7 11.9 47.0 45.7
EBITDA $        (10.5) $           6.8 $        (27.7) $         35.3

 

FRED’S, INC.
Unaudited Financial Highlights
(In thousands, except per share amounts)

13 Weeks EndedJanuary 28, 2017 13 Weeks EndedJanuary 30, 2016 PercentChange
Net sales $    529,728 $    554,577 (4.5)%
Operating loss $     (22,154) $       (5,105) (334.0)%
Net loss $     (22,466) $       (3,901) (475.9)%
Net loss per share, basic and diluted $         (0.60) $         (0.11) (445.5)%
Average shares outstanding:  
Basic 37,202 36,837
Diluted 37,202 36,837

 

52 Weeks EndedJanuary 28, 2017 52 Weeks EndedJanuary 30, 2016 PercentChange
Net sales $ 2,125,424 $ 2,150,703 (1.2)%
Operating loss $     (74,696) $     (10,399) (618.3)%
Net loss $     (66,531) $       (7,371) (802.6)%
Net loss per share, basic and diluted $         (1.80) $         (0.20) (800.0)%
Average shares outstanding:  
Basic 36,876 36,675
Diluted 36,876 36,675


FRED’S, INC.
Unaudited Fiscal 2016 Fourth Quarter Results
(In thousands, except per share amounts)

13 Weeks EndedJanuary 28, 2017 % ofTotal 13 Weeks EndedJanuary 30, 2016 % ofTotal
Net sales $   529,728 100.0% $   554,577 100.0%
Cost of goods sold 400,132 75.5% 421,698 76.0%
Gross profit 129,596 24.5% 132,879 24.0%
Depreciation & amortization 11,701 2.2% 11,865 2.1%
Selling, general and administrative expenses 140,049 26.5% 126,119 22.8%
Operating loss (22,154) (4.2)% (5,105) (0.9)%
Interest expense, net 633 0.1% 368 0.1%
Loss before income taxes (22,787) (4.3)% (5,473) (1.0)%
Income tax benefit (321) (0.1)% (1,572) (0.3)%
Net loss $    (22,466) (4.2)% $      (3,901) (0.7)%
Net loss per share,basic and diluted $        (0.60)   $        (0.11)
Weighted average shares outstanding:    
Basic 37,202   36,837
Diluted 37,202   36,837

 

52 Weeks EndedJanuary 28, 2017 % ofTotal 52 Weeks EndedJanuary 30, 2016 % ofTotal
Net sales $ 2,125,424 100.0% $ 2,150,703 100.0%
Cost of goods sold 1,615,162 76.0% 1,606,553 74.7%
Gross profit 510,262 24.0% 544,150 25.3%
Depreciation & amortization 47,027 2.2% 45,652 2.1%
Selling, general and administrative expenses 537,931 25.3% 508,897 23.7%
Operating loss (74,696) (3.5)% (10,399) (0.5)%
Interest expense, net 2,318 0.1% 1,431 0.1%
Loss before income taxes (77,014) (3.6)% (11,830) (0.6)%
Income tax benefit (10,483) (0.5)% (4,459) (0.3)%
Net loss $    (66,531) (3.1)% $      (7,371) (0.3)%
Net loss per share,basic and diluted $        (1.80)   $        (0.20)
Weighted average shares outstanding:    
Basic 36,876   36,675
Diluted 36,876   36,675


FRED’S, INC.
Unaudited Balance Sheet
(In thousands)

January 28, 2017 January 30, 2016
ASSETS:  
Cash and cash equivalents  $        5,830  $        5,917
Inventories        331,809        340,730
Receivables          51,668          53,171
Other non-trade receivables          33,954          40,049
Prepaid expenses and other current assets          11,945          11,494
Total current assets        435,206        451,361
Property and equipment, net        130,922        138,993
Goodwill          41,490          41,490
Other intangible assets, net          85,685          97,153
Other non-current assets            6,104            1,515
Total assets  $    699,407  $    730,512
 
LIABILITIES AND SHAREHOLDERS’ EQUITY:  
Accounts payable  $    147,340  $    184,657
Current portion of indebtedness                 60               621
Accrued expenses and other          64,648          56,074
Total current liabilities        212,048        241,352
Long-term portion of indebtedness        128,388          52,527
Deferred income taxes                                    1,974            9,724
Other non-current liabilities          19,801          22,698
Total liabilities        362,211        326,301
Shareholders’ equity        337,196        404,211
Total liabilities and shareholders’ equity  $    699,407  $    730,512

fred’s Announces Appointment of Linda Longo-Kazanova to Board of Directors

MEMPHIS, Tenn. (BUSINESS WIRE) —Fred’s Inc. (“Fred’s Pharmacy” or the “Company”) (NASDAQ:FRED) today announced that it has appointed Linda Longo-Kazanova to its Board of Directors, effective immediately. In connection with today’s announcement, Steven R. Fitzpatrick will retire from the Board and not stand for reelection at the 2017 Annual Meeting of Shareholders. Today’s announcement is part of the Board’s ongoing reconstitution process, with the assistance of Spencer Stuart, a leading executive search firm, to add world-class, highly-qualified and experienced directors to the Board.

Ms. Longo-Kazanova brings to the Board her 16 years of experience as Chief Human Resources Officer with growing companies and businesses-in-transition, as well as significant expertise working with public company boards of directors on a variety of matters, including significant M&A and divestiture transactions. Most recently, Ms. Longo-Kazanova was Chief Human Resources Officer at Keurig Green Mountain, Inc., where she was responsible for all aspects of global human resources. While at Keurig, she contributed to the company’s growth from $1.3 billion to $4.5 billion in revenue, supporting transformation in the board, management team and culture as the business expanded. Prior to working at Keurig, Ms. Longo-Kazanova served as Vice President, Human Resources and Medical at Burlington Northern Santa Fe Corporation (BNSF), and in a number of positions at Kraft Foods, Inc., including global Director, Management and Organization Development.

“Linda is an accomplished executive and we are excited to add her to the Board as part of our ongoing reconstitution process,” said Thomas H. Tashjian, Chairman of the Board. “Fred’s will benefit from her significant HR and integration leadership experience specifically related to talent acquisition and development, compensation and benefits, culture and workplace environment, and employee communications and development, including during complex M&A situations. Linda’s appointment increases the Board’s independence and bolsters its expertise and oversight as we continue executing our transformation and strategic plan. This announcement also follows the recent appointments of Chris Bodine and Pete Bocian who, together with Linda, will provide the Board with decades of public company director and executive leadership experiences across the consumer, retail, pharmaceutical and technology industries.”

Tashjian continued, “I want to thank Steve for his years of dedicated service to the Fred’s Board. We are grateful for Steve’s immense contributions and wish him the best in his future endeavors.”

“I am delighted to join the Fred’s Pharmacy Board of Directors,” said Ms. Longo-Kazanova. “This is an exciting time for the company as it continues executing its plan to improve performance. I look forward to begin working with the rest of the Board and management team and contributing immediately as we build on the momentum and progress underway.”

About Linda Longo-Kazanova

Ms. Longo-Kazanova is a seasoned global C-suite executive with a business background diversified across multiple industries, including consumer packaged goods, transportation, information services and insurance with companies from $1-15 billion in revenue. She most recently served as Chief Human Resources Officer at Keurig.

Prior to working at Keurig, Ms. Longo-Kazanova served as Vice President, Human Resources and Medical at BNSF from 2007 to 2010, managing the human resources function for 38,500 employees, and as SVP, Human Resources and Business Optimization, at Bell and Howell Company (later known as ProQuest Company) from 2000 to 2007. She also worked at Kraft Foods, Inc. from 1985 to 1995 where she served in a number of positions including global Director, Management and Organization Development.

As a trusted partner to three public company boards (Keurig, BNSF, and Bell and Howell Company, as well as the private board for Keurig after its acquisition by JAB Holdings) she has significant experience working closely with boards and their advisors to align executive compensation with business strategy and regulatory compliance, ensure succession and a talent pipeline. She has managed departures, searches and onboarding of new leaders and was integral in recruiting new board members. Ms. Longo-Kazanova previously served as a board member for Susan G Komen For the Cure, Fort Worth and as a Trustee for Trinity Valley School in Texas.

Ms. Longo-Kazanova holds a Ph.D. in Psychology from Northwestern University, a Masters in Counseling Psychology and Bachelors in Anthropology from University of Delaware.

About Fred’s Pharmacy

Tracing its history back to an original store in Coldwater, Mississippi, opened in 1947, today Fred’s Pharmacy is headquartered in Memphis, Tennessee, and operates 601 pharmacy and general merchandise stores and three specialty pharmacy-only locations, including 14 franchised Fred’s Pharmacy locations. With a unique store format and strategy that combines the best elements of a healthcare-focused drug store with a value-focused retailer, Fred’s Pharmacy stores offer more than 12,000 frequently purchased items that address the healthcare and everyday needs of its customers and patients. This includes nationally recognized brands, proprietary Fred’s Pharmacy label products, and a full range of value-priced selections. The company has two distribution centers, one in Memphis, Tennessee, and Dublin, Georgia.

For more information about the Company, visit Fred’s website at www.fredsinc.com.

Contacts
Fred’s Pharmacy
Rick Hans, 901-362-3733, Ext. 2232
Executive Vice President, Chief Financial Officer and Secretary
or
Joele Frank, Wilkinson Brimmer Katcher
Ed Trissel / Steve Frankel / Dan Moore
212-355-4449 read more

fred’s PHARMACY SCHEDULES FOURTH QUARTER AND FULL-YEAR 2016 EARNINGS ANNOUNCEMENT AND CONFERENCE CALL WEBCAST FOR APRIL 6, 2017

MEMPHIS, Tenn. – March 15, 2017 – Fred’s Inc. (NASDAQ: FRED) today announced that its fourth quarter and full-year 2016 results will be issued on the morning of Thursday, April 6, 2017. The Company will also report March 2017 sales on this date.

Fred’s Pharmacy will host a conference call/webcast at 8:00 a.m. Eastern Time on Thursday, April 6, 2017, to discuss the Company’s fourth quarter and full-year 2016 results. The webcast will be available live and as an archived replay through the Company’s website at www.fredsinc.com. The archived replay will be available beginning two hours after the conclusion of the live call and will remain available through May 6, 2017.

About Fred’s Pharmacy
Tracing its history back to an original store in Coldwater, Mississippi, opened in 1947, today Fred’s Pharmacy is headquartered in Memphis, Tennessee, and operates 643 pharmacy and general merchandise stores and three specialty pharmacy-only locations, including 14 franchised Fred’s Pharmacy locations. With a unique store format and strategy that combines the best elements of a healthcare-focused drug store with a value-focused retailer, Fred’s Pharmacy stores offer more than 12,000 frequently purchased items that address the healthcare and everyday needs of its customers and patients. This includes nationally recognized brands, proprietary Fred’s Pharmacy label products, and a full range of value-priced selections. The company has two distribution centers, one in Memphis, Tennessee, and Dublin, Georgia.

As previously announced, on December 20, 2016, Fred’s Pharmacy announced that it signed an agreement with Walgreens Boots Alliance, Inc. (NASDAQ: WBA) and Rite Aid Corporation (NYSE: RAD) to purchase 865 stores and certain assets related to store operations located across the eastern and western United States for $950 million in cash. Closing of the transaction is conditioned on the completion of Walgreens Boots Alliance’s proposed acquisition of Rite Aid, approval by the Federal Trade Commission, as well as customary regulatory approvals and closing conditions.

For more information about the Company, visit Fred’s website at www.fredsinc.com.

Contact:
Rick Hans
Executive Vice President,
Chief Financial Officer and Secretary
(901) 238-2232 read more

fred’s Pharmacy Announces Appointment of New Directors

Fred’s Pharmacy Announces Appointment of New Directors

Two Independent Directors and Chief Executive Officer Michael K. Bloom Appointed

MEMPHIS, Tenn.— March 7, 2017 – Fred’s Inc. (“Fred’s Pharmacy” or the “Company”) (NASDAQ:FRED) today announced that it has appointed Christopher W. Bodine, Peter J. Bocian and Michael K. Bloom, Fred’s Pharmacy’s Chief Executive Officer, to its Board of Directors, effective immediately. In connection with today’s announcement, Michael J. Hayes, John R. Eisenman and Jerry A. Shore will retire from the Board and not stand for reelection at the 2017 Annual Meeting of Shareholders. Today’s announcement is part of a robust and ongoing reconstitution process in which the Board has been actively engaged, with the assistance of Spencer Stuart, a leading executive search firm, to add world-class, highly-qualified and experienced directors to the Board.

Christopher W. Bodine
Chris Bodine brings to the Board his experience and expertise of successful leadership at CVS Caremark Corporation and in other industries.

  • During his 24-year tenure at CVS Caremark he helped build the company with its rapid and successful global growth, including leadership positions such as Executive Vice President and President, Health Care Services, where he was responsible for strategy, business development, trade relations, sales and account management, pharmacy merchandising, marketing, information technology and the MinuteClinic.
  • Bodine drove the integration and growth efforts at CVS, including the merger of CVS and Caremark, and was tasked with leveraging the strengths of the combined company to accelerate the profitable growth of the retail and PBM businesses. Bodine is credited with incorporating elements of Caremark’s healthcare services division and establishing CVS’ culture company-wide.
  • During his tenure at CVS, Bodine helped manage several of the Company’s largest acquisitions and was known for giving personal attention to the integration of chains acquired by the company, including moving to Florida for six months following the purchase of approximately 1,260 Eckerd Corp. stores and to the West Coast after the acquisition of more than 700 Sav-on and Osco stores.
  • Bodine spearheaded CVS’ purchase of MinuteClinic, pioneering the concept of immediate-care facilities within CVS stores, and was responsible for its integration into CVS.
  • Bodine is active in the pharmaceutical industry, having served on numerous boards and committees, including the Healthcare Leadership Council, RI Quality Institute, National Retail Federation, National Association of Chain Drug Stores (NACDS), and the NACDS Pharmacy Affairs and Leadership Committees.
  • Bodine has been recognized by numerous publications for his accomplishments. He was named one of Chain Drug Review’s 2007 Chain Drug Retailers of the Year, and in 2005 he was named as Mass Market Retailers Magazine’s Top Retail Merchandizer and Drug Store News’ “Five People Who Made a Difference” in Retail.
  • Bodine currently serves on the Board of Allergan PLC as a director, Chairman of the Nominating and Governance Committee and a Member of the Compensation Committee. During his tenure since 2009, Allergan PLC has generated a 617% Shareholder Return.[1]

Peter J. Bocian
Pete Bocian brings to the Board extensive executive expertise in the retail and technology sectors, with a track record of creating substantial value at a number of highly recognized global companies. He has significant financial, accounting and technology expertise.

  • Bocian has served in C-suite or executive level finance and administrative roles at NCR, Starbucks, Hewlett-Packard, JPMorgan Chase and Safeway, where he most recently served as Executive Vice President and CFO until 2015.
  • Bocian has extensive experience with leading retail companies, including CFO positions at Safeway and Starbucks, and a 24-year career at NCR, a company with significant focus on technology and POS systems for the retail, banking, airline and hospitality industries. Bocian helped deliver significant increases to shareholder value during his CFO tenure at NCR.
  • Most recently, Bocian was the Chief Financial Officer of Safeway, where the company delivered strong returns during his approximately two year tenure. Bocian played a leadership role in rationalizing the portfolio to create more value and in the eventual sale and merger with Albertsons.

Michael K. Bloom, President and CEO
Mike Bloom, who was appointed CEO of Fred’s Pharmacy on August 29, 2016, brings to the Board more than 30 years of experience in small-box retail pharmacy, general merchandising, marketing, supply chain and store operations.

  • Prior to joining Fred’s, Bloom served as the President and Chief Operating Officer of Family Dollar Stores, Inc. and spent more than 20 years with CVS Caremark Corporation, holding a variety of positions with increasing responsibilities in merchandising, marketing, supply chain and store operations, and rising finally to Executive Vice President of Merchandising, Visual Merchandising, Marketing, Store Brand, Advertising and Supply Chain.
  • Bloom has substantial acquisition and integration experience from his time at CVS Pharmacy, where he was involved in the acquisitions of Peoples Drug Stores, Revco, Eckerd Corp., Arbor Drugs and Longs.
  • As CEO of Fred’s, Bloom assembled a strong new leadership team that has led the development of the growth plan referred to as Optimize, Focus and Growth with Discipline. The key components include optimizing Fred’s portfolio of stores, growing retail pharmacy scripts, expanding into healthcare services, expanding the specialty pharmacy portfolio of drugs and delivering leaner and more cost effective results in both pharmacy and front of store.
  • Since Bloom became CEO, Fred’s Pharmacy’s has generated a 29% Shareholder Return.[2]
  • Bloom played a vital role in Fred’s being selected by Walgreen’s Boots Alliance, Inc. as the acquirer of the previously announced transaction under which Fred’s will acquire 865 divested stores, pending FTC approval.
  • Since becoming CEO, Bloom has increased emphasis on both retail and specialty pharmacy growth as a priority, which have been catalysts for growth at Fred’s.

“We are pleased to welcome Chris, Pete and Mike to the Fred’s Pharmacy Board of Directors,” said Thomas H. Tashjian, Chairman of the Board. “This is an exciting time for Fred’s Pharmacy, as our highly experienced management team continues to execute on value-enhancing initiatives, including acquiring 865 Rite Aid stores, optimizing our store fleet and upgrading our technology infrastructure. Under Mike’s leadership, Fred’s has made significant progress towards the execution of our strategic vision, and we are thrilled that he can expand his role in the Company through today’s appointment. All of our new directors strengthen our Board by contributing their vast knowledge of the retail and healthcare industries, substantial leadership experience and financial expertise and strong track record of successfully integrating acquisitions. Moreover, our work is not done, as we continue to transform the Board to ensure we have the right experience and expertise to ensure the success of Fred’s Pharmacy’s exciting future.”

Tashjian continued, “I want to thank Jack, former CEO Jerry Shore, and especially former Chairman and CEO Mike Hayes, for their devoted contributions on the Fred’s Pharmacy Board.  After many years of appreciated service to the Company, we wish them the best in the future.”

“I am delighted to be joining the Board, especially at such an important time for the Company,” said Bloom. “Since we assembled the management team in 2015, we have been executing on a comprehensive plan to optimize performance at the Company. We are also focused on completing the transformative acquisition of 865 Rite Aid stores. We believe our leadership team’s significant transaction experience will enable a smooth integration of the Rite Aid stores. I look forward to working with my fellow Board members to continue to grow the Company and make Fred’s Pharmacy the industry leader I know it can be.”

“I am honored to join the talented individuals on the Fred’s Pharmacy Board,” said Bocian. “With its focused mission and first-class management team, I am confident Fred’s Pharmacy has a bright future. Working with my fellow Board members, I look forward to making immediate contributions.”

“I am excited about joining the Fred’s Pharmacy Board and look forward to putting my skills and experiences in the industry to work on behalf of all of the Company’s investors,” said Bodine. “Pete, Mike and I will work closely with the other members of the Board to help set the Company’s strategy and advance the Company’s efforts to enhance value for Fred’s Pharmacy shareholders.”

About Fred’s Pharmacy
Tracing its history back to an original store in Coldwater, Mississippi, opened in 1947, today Fred’s Pharmacy is headquartered in Memphis, Tennessee, and operates 643 pharmacy and general merchandise stores and three specialty pharmacy-only locations, including 14 franchised Fred’s Pharmacy locations. With a unique store format and strategy that combines the best elements of a healthcare-focused drug store with a value-focused retailer, Fred’s Pharmacy stores offer more than 12,000 frequently purchased items that address the healthcare and everyday needs of its customers and patients. This includes nationally recognized brands, proprietary Fred’s Pharmacy label products, and a full range of value-priced selections. The company has two distribution centers, one in Memphis, Tennessee, and Dublin, Georgia.

As previously announced, on December 20, 2016, Fred’s Pharmacy announced that it signed an agreement with Walgreens Boots Alliance, Inc. (NASDAQ: WBA) and Rite Aid Corporation (NYSE: RAD) to purchase 865 stores and certain assets related to store operations located across the eastern and western United States for $950 million in cash. Closing of the transaction is conditioned on the completion of Walgreens Boots Alliance’s proposed acquisition of Rite Aid, approval by the Federal Trade Commission, as well as customary regulatory approvals and closing conditions.

For more information about the Company, visit Fred’s website at www.fredsinc.com.

Forward Looking Statements
Comments in this news release that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. A reader can identify forward-looking statements because they are not limited to historical facts or they use such words as “outlook,” “guidance,” “may,” “should,” “could,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “forecast,” “goal,” “intend,” “committed,” “continue,” or “will likely result” and similar expressions that concern the Company’s strategy, plans, intentions or beliefs about future occurrences or results. These risks and uncertainties include, but are not limited to, those associated with the Company’s announced strategic plan, the success of announced acquisition activities and future growth trends in businesses acquired; general economic trends; risks related to the possibility that the transactions may not close, including because one or more closing conditions to the transactions, including certain regulatory approvals, may not be satisfied or waived, on a timely basis or otherwise, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of the transactions, or may require conditions, limitations or restrictions in connection with such approvals; the risk that the businesses and acquired stores, as applicable, will not be integrated successfully; the risk of litigation and/or regulatory actions related to the proposed transaction; changes in consumer demand or purchase patterns; delays or interruptions in the flow of merchandise between the Company’s distribution centers and its stores or between the Company’s suppliers and same; a disruption in the Company’s data processing services; cyber-security threats; costs and delays in acquiring or developing new store sites; and the factors listed under “Risk Factors” in the Company’s most recent Annual Report on Form 10-K and any subsequent quarterly filings on Form 10-Q filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date made. Fred’s undertakes no obligation to release revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.

View more information regarding these appointments.

Contacts
Fred’s Pharmacy
Rick Hans, 901-362-3733, Ext. 2232
Executive Vice President, Chief Financial Officer and Secretary
or
Joele Frank, Wilkinson Brimmer Katcher
Ed Trissel / Steve Frankel / Dan Moore
212-355-4449

  read more

fred’s Pharmacy Reports February Sales

Fred’s Pharmacy Reports February Sales

MEMPHIS, Tenn.–(BUSINESS WIRE)–Fred’s Inc. (“Fred’s Pharmacy” or “the Company”) (NASDAQ:FRED) today reported sales for the four-week fiscal month of February, the first month of fiscal 2017, which ended February 25, 2017.

Fred’s total sales for the month decreased 3.5% year-over-year to $165.4 million from $171.4 million in February 2016. Total comparable store sales for the month declined 4.0% compared with a 0.8% increase in comparable sales in the prior year period.

Commenting on the announcement, Michael K. Bloom, Chief Executive Officer, said, “Despite the tax refund delay impacting a significant percentage of our customer base and our front of store sales, we are pleased with the progress we are making against our strategic plan, demonstrated by our continued improvement in Retail and Specialty Pharmacy. This is an affirmation that our healthcare strategy is working. Notably, comparable store sales in our overall Pharmacy business were strong in the month, driven by positive adjusted prescription comparisons.”

Mr. Bloom continued, “Progress against our strategic plan in the front of store was offset in February by the significant delay of individual tax refunds, which are down approximately 13% year-over-year.1 However, comparable sales in our front of store improved in the last week of February as individual refunds were received by customers. Looking ahead to March and the remainder of the first quarter, we expect customer spending will continue to increase as tax refunds are received.

“We continue to execute on our strategic initiatives aimed at providing healthcare services and value merchandise in the markets we serve. We remain confident in our long-term transformational strategy to capitalize on the opportunity to grow sales and enhance value for our shareholders.”

Fred’s Pharmacy and its subsidiaries operate 643 discount general merchandise stores and three specialty pharmacy-only locations in 15 states in the southeastern United States. Included in the store count are 14 franchised locations. Also, there are 354 full service pharmacy departments located within Fred’s stores, including one franchised location. For more information about the Company, visit Fred’s website at www.fredsinc.com.

Comments in this news release that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. A reader can identify forward-looking statements because they are not limited to historical facts or they use such words as “outlook,” “guidance,” “may,” “should,” “could,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “forecast,” “goal,” “intend,” “committed,” “continue,” or “will likely result” and similar expressions that concern the Company’s strategy, plans, intentions or beliefs about future occurrences or results. These risks and uncertainties include, but are not limited to, those associated with the Company’s announced strategic plan, the ultimate terms of the reworked pharmacy distribution agreement, lease buyouts and the underlying assumptions and projections upon which they are based, as well as risks that intended results may not be achieved or may not occur as quickly as expected; the success of announced acquisition activities and future growth trends in businesses acquired; general economic trends; changes in consumer demand or purchase patterns; delays or interruptions in the flow of merchandise between the Company’s distribution centers and its stores or between the Company’s suppliers and same; a disruption in the Company’s data processing services; cyber-security threats; costs and delays in acquiring or developing new store sites; and the factors listed under “Risk Factors” in the Company’s most recent Annual Report on Form 10-K and any subsequent quarterly filings on Form 10-Q filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date made. Fred’s undertakes no obligation to release revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.

 1 Based on data released by the U.S. Department of Treasury as of Friday, February 24, 2017.

Contacts
Fred’s Inc.
Rick Hans, 901-238-2232 read more

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