Floundering Fred’s Tries a New Approach, While Closing Stores

(UPDATE: On September 9th, Fred’s filed for bankruptcy and announced that liquidation sales would begin immediately at the rest of its stores, all of which are expected to close within the next 60 days. “Despite our team’s best efforts, we were not able to avoid this outcome,” CEO Joe Anto said in a statement.)

For decades, Fred’s was a general merchandise chain largely unknown outside the rural South. But for a brief period of time a couple of years ago, Fred’s was poised to transform itself into one of the largest pharmacy chains in the country.

If Fred’s stores didn’t start sprouting up in your area, though, that’s because that never happened. Instead, Fred’s is returning to its roots as a rural general merchandise store – and if that doesn’t work, the floundering chain may be finished.

On Friday, Fred’s announced yet another round of store closings, together with an effort to reimagine the few stores it has left. Just a few months ago, the financially-troubled Memphis-based retailer had nearly 600 stores in 15 southeastern states. When the latest string of store closings Is complete, Fred’s will have a mere 80 stores in eight states (in the interest of brevity, rather than listing all of the store closings, the list of stores that will actually remain open is below).

In the closing stores – and even in the stores that will remain open – Fred’s says it will hold clearance sales “in an effort to refocus its product mix, simplify its store portfolio and repay debt.” It’s all part of Fred’s efforts to introduce “a new operating model, with an updated assortment.”

“We are pleased to present our loyal customers the unique and compelling opportunity to purchase heavily discounted items for a limited time,” CEO Joe Anto said in a statement. “We encourage shoppers to take advantage of these unmatched deals, and stock up on items that may be permanently removed from Fred’s shelves, come August.”

Fred’s offered no further details about exactly what its new-look stores will look like. But the changes come as Fred’s emphasizes its “unique value-priced shopping opportunities” and de-emphasizes its dwindling pharmacy business. Fred’s has already sold its specialty pharmacy business to CVS, it’s sold nearly 200 of its other pharmacies to Walgreens and is looking to sell the rest. It even recently changed its store logo from “Fred’s Pharmacy” to one that simply reads “Fred’s” in old-timey script with a reference to its 1947 founding.

That’s a far cry from just a few years ago, when the chain started turning away from its previous incarnation as “Fred’s Super Dollar” in order to position itself as a pharmacy chain. All the better to acquire more than 800 Rite Aid stores in a deal announced in late 2016, which would more than double Fred’s store count and turn it into a national drug store powerhouse overnight.

Except that deal fell apart after Walgreens abandoned its attempt to buy Rite Aid, and no longer had to sell off those 800+ Rite Aid stores in order to satisfy antitrust concerns. And then Fred’s optimistic outlook for its future started to sour.

By that time, New York hedge fund Alden Global Capital had become Fred’s largest shareholder. Having missed out on the chance to benefit from the scuttled Rite Aid deal, it took control of Fred’s, installing a new CEO and trying to increase profits by cutting costs, selling assets and streamlining the business.

But that hasn’t gone so well. Cash-flow problems caused shelves to go unstocked, which helped drive customers away, which led to store closures. The chain-reaction downward spiral has reached the point that Fred’s barely has any stores left.

And now what could have been a 1,400-store national drug store chain has become an 80-store small-town discounter, with unspecified plans for “an updated assortment” and “a new operating model.” So now’s your chance to “stock up on items that may be permanently removed from Fred’s shelves” – as Fred’s tries to keep itself from being permanently removed from the retail landscape for good.

Image source: Fred’s