Fred's names former Walgreens exec as head merchant

Putting aside a worse than expected fourth quarter loss, regional discounter Fred’s could be on the cusp of more meaningful growth after assembling a roster of top executive talent under the leadership of CEO Jerry Shore and president Mike Bloom.

Fred’s is one of the retail industry’s last remaining regional discounters with 661 stores concentrated in the Southeast. For much of the past decade has struggled to find its competitive footing in a trading area where it goes head to head with major players such as Walmart, Dollar General and Walgreens. The company’s prospect could be about to change now that a major overhaul of the senior leadership team appears complete with a new round of additions involving former Walgreens, AutoZone and Walmart executives. The changes comes just two months after Fred’s named former Family Dollar and CVS executive Michael Bloom as Fred’s president and COO and less than six months after Jerry Shore was elevated from his role as CFO to serve as CEO.

"Working together with Mike Bloom, our president and chief operating officer, we are now assembling a solid, experienced management team that complements our pharmacy team to drive growth in market share and improve profitability. We are very excited about how this team has come together and the opportunities ahead for Fred's,” said Fred’s CEO Jerry Shore.

In his new role at Fred’s, Pugh will work to develop new and enhance current merchandising and marketing strategies and processes, promote stronger supplier partnerships, convert pharmacy patients to front-of-store customers, and build on the value proposition that Fred's offers its customers, according to the company.

Pugh spent six years at Walgreens, more recently serving as vice president of U.S. merchandising, program development and execution, before leaving the company last fall. Prior to that he served as executive vice president of operations for Tesco’s Fresh & Easy Neighborhood Markets and as COO and senior vice president of merchandising and marketing for Tesco’s Lotus stores in Asia.

Pugh will be aided by Craig Barnes who assumes the role of executive vice president of supply chain and sourcing logistics after joining the company as a general merchandise manager last November. Prior to joining Fred's, Barnes held executive positions at AutoZone, Carquest and Delphi Automotive. In his new role he oversees supply chain, store operations, global logistics, sourcing and inventory management.

The company said Barnes has a unique skill set of merchandising, store operations, supply chain and sourcing that will drive the company's plans to move from a distribution strategy to a fully integrated supply chain retailer, a critical step in becoming a low-cost operator.

Another key move involved the promotion of Mike Holligan to the role of executive vice president of store operations. Holligan most recently served as Fred’s regional vice president of store operations and also spent 18 years at Walmart.

"I am very enthusiastic about the experience that this leadership team brings to their respective roles and the way they position Fred's to drive profitability and to grow the convenience/pharmacy-centric model,” said Fred’s president and COO Mike Bloom.

The moves were announced prior to the release of financial results which saw Fred’s produce a net loss of $8.2 million, or 22 cents a share, in the fourth quarter ended Jan. 31. compared to a profit of $4 million, or 11 cents a share, the prior year. Sales increased to $504 million from $495 million and same store sales were flat. Fred’s net loss for the year totaled $28.9 million, or 79 cents a share, compared with net income of $26, million, or 71 cents a share, the prior year.

"Although our pharmacy department posted another strong script performance in 2014, the year overall was challenging as we dealt with problems in the general merchandise side of our business and the expiring pharmacy supply contract,” CEO Shore said. “During the last half of the year, we worked aggressively to clear inventory, close underperforming stores, and improve supply chain strategies, among other things. Clearly, those steps were painful from a near-term perspective, but necessary in terms of our goal to restore Fred's to profitability, expand gross margins and capitalize on the positive business in the pharmacy department.”