Fred's Feels Fuel Spike

MEMPHIS-Rising fuel costs have set back the sales of yet another discounter. This time Fred’s, a Southeastern chain with 624 units, reported that its year-over-year same-store sales inched up 0.8% during its Q2, compared to a 4% jump during the same year-ago period.

Going forward, executives predict that this month’s same-store sales will fall 4%, and Q3 should result in a 1% to 3% drop. “Our back-to-school sales have been less than anticipated,” added CFO Jerry Shore during a conference call report on the quarter, which ended July 30. Executives say they expect same-store sales to bounce back over the company’s Q4, for which they are predicting a flat-to-2% jump.

During the quarter traffic fell 1.1%, though the average ticket sale increased 1.9%, to $17.66. Pharmacy products were the chain’s top selling item, making up 32.8% of sales, followed by household goods, at 23.2%, and apparel at 13.4%.

Fred’s currently has coolers for food items in 400 of its stores and executives plan to roll out the offering throughout the rest of the chain by Nov. 1. Units with coolers have 5% better sales than those without, Fred’s officials say.

In the quarter, the company opened 19 discount stores, seven pharmacies and closed two units. So far this year, it has opened 41 units, 14 pharmacies and closed five stores.

The quarter’s total sales were $373.3 million, up 10%, while net income rose 19%, to $3.5 million. For the first half of the year, sales rose 11%, to $756.1 million.