Please ensure Javascript is enabled for purposes of website accessibility

Why Shares of Fred's Dropped Today

By Timothy Green - Mar 3, 2017 at 3:09PM

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

A delay in tax refunds reaching its customers took a bite out of February sales.

What happened

Shares of retail and pharmacy chain Fred's (FRED) slumped on Friday following the release of a weak February sales report that featured a steep decline in comparable-store sales. At 3:20 p.m. EST, the stock was down about 10.5%.

So what

Fred's reported February sales of $165.4 million, down 3.5% year over year. Comparable-store sales slumped by 4%, a significant deterioration from the 0.8% increase the company reported during the prior-year period.

The Fred's Pharmacy logo.

Image source: Fred's.

Fred's CEO Michael Bloom pointed to a delay in tax refunds reaching customers as the main driver behind the sales decline. Tax refunds were down 13% year over year as of Feb. 24, according to the U.S. Department of Treasury.

The pharmacy business was a bright spot for Fred's, with the company saying that comparable sales were strong. This was more than offset, however, by weakness in the rest of the business.

Now what

Sales improved in the last week of February, driven by additional tax refunds received by customers. Fred's expects sales to continue to improve during the remainder of the first quarter as the delay in tax refunds is worked through.

Bloom remains confident in the company's long-term strategy: "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."

Invest Smarter with The Motley Fool

Join Over 1 Million Premium Members Receiving…

  • New Stock Picks Each Month
  • Detailed Analysis of Companies
  • Model Portfolios
  • Live Streaming During Market Hours
  • And Much More
Get Started Now

Stocks Mentioned

Fred's, Inc. Stock Quote
Fred's, Inc.

*Average returns of all recommendations since inception. Cost basis and return based on previous market day close.

Related Articles

Motley Fool Returns

Motley Fool Stock Advisor

Market-beating stocks from our award-winning analyst team.

Stock Advisor Returns
S&P 500 Returns

Calculated by average return of all stock recommendations since inception of the Stock Advisor service in February of 2002. Returns as of 06/26/2022.

Discounted offers are only available to new members. Stock Advisor list price is $199 per year.

Premium Investing Services

Invest better with The Motley Fool. Get stock recommendations, portfolio guidance, and more from The Motley Fool's premium services.