Memphis, Tenn. — Fred’s Inc. (NASDAQ: FRED), a discount chain and pharmacy, will close 159 underperforming U.S. stores, approximately 30 percent of the company’s total footprint.
Memphis, Tennessee-based Fred’s will have about 400 general merchandise stores left open following this round of closures. Fred’s, which competes with smaller-format discount retailers like Dollar General as well as big-box stores like Walmart, also owns and operates two additional chains: Getwell Drug & Dollar and Yazoo Trading Co.
The majority of those stores house full-service pharmacy departments, but the company is also looking to sell its pure-play pharmacy assets. In September of last year, Fred’s struck a deal to sell prescription files of its pharmacy patients and inventory information at 179 stores across the Southeast to Walgreens (NASDAQ: WBA).
The shuttered stores are located in Texas, Arkansas, Alabama, Georgia, Louisiana, Mississippi, Kentucky and Tennessee, according to CNN. Liquidation sales are underway at these stores, which are expected to fully close by the end of May.
Fred’s CEO Joseph Anto noted that in addition to losing profitability, most of the shuttered stores are nearing the ends of their lease terms.
“After a careful review, we have decided to rationalize our footprint by closing underperforming stores, with a particular focus on locations with shorter-duration leases,” said Anto. “Most of these [closing] stores have near-term lease expirations and limited remaining lease obligations.”
Fred’s has partnered with Malfitano Advisors LLC and SB360 Capital Partners to facilitate the downsizing process. The company has also retained investment bank PJ Solomon to assist with evaluating new strategic alternatives.
Fred’s stock price opened at $1.83 per share Monday, April 15, down from $2.86 a year ago. The stock price has not surpassed $4 per share in the last year despite hitting a five-year high of $20.20 in December 2016.
The high point came in late 2015 when Fred’s agreed to buy 865 Rite Aid stores, a deal that spun off from Walgreens’ bid to acquire Rite Aid. According to The Motley Fool, Fred’s was included in the merger bid to appease antitrust regulators, but when the FTC rejected Walgreens’ bid for Rite Aid, forcing the Illinois-based retailer to settle for a partial share of rival Rite Aid. Walgreens ultimately acquired about 2,000 Rite Aid stores for $4.4 billion, but Fred’s was completely nixed from the original deal.
A list of impacted stores can be found here.
— Taylor Williams