This post is part of my series featuring established companies and the smaller, more aggressive or innovative rivals that may eventually succeed them.
With over 4,000 stores in the United States ranging from warehouse-concept Sam's Club to discount retail stores to supercenters, Wal-Mart (NYSE: WMT) is by far the largest retailer in the U.S. -- and the world. So where does Wal-Mart go from here? International expansion has become the true growth engine for Wal-Mart as it dots the landscapes of other nations. The company has embarked on a series of initiatives these past 15 months to spruce up the stores, install better lighting and offer a more competitive brand of consumer goods. Recent same-store sales have validated these improvements.
Wal-Mart has been the beneficiary of a more cost-conscious consumer in this economic slowdown. Yet it can only squeeze so much growth out of its existing locations. And if it opens more stores, it risks cannibalizing the revenues of its existing stores.
Enter Fred's (NASDAQ: FRED). This quiet, regional concept has been around since 1947. Fred's is headquartered in Memphis, Tennessee, and has its base in 15 Southeastern states. Fred's has 659 discount stores and 280 pharmacies in its system -- with room to grow. Fred's has 24 franchisees, which is a quicker way to expand the concept while not draining the corporate coffers.
Fred's offers a full range of apparel, food, sporting goods and other general merchandise in its system. The company's philosophy is: quality merchandise at a discount price. The stores are well lit, organized and make for a pleasant shopping experience.
Recently, the company embarked on a "clean-up" strategy of closing unproductive stores and pharmacies. Currently, the company has shut down or is in the midst of shutting down 75 such facilities with the idea of replacing them with newer and better located stores. Recent same-store sales for May were up 3.4%, while total sales were up 8%, bearing out the strategy.
Fred's has the "room to grow" quite substantially over the next decade. With units only in 15 states, the discount concept can triple its store base and still not encounter any saturation issues. Not ready to knock Wal-Mart off of its perch just yet, Fred's is emerging as a retailer with a national vision.
Georges Yared is the editor of GameOnInvesting, a free service devoted to helping investors spot game-changing stocks before they breakout.











Reader Comments (Page 1 of 5)
6-27-2008 @ 6:33AM
SUSAN said...
WE HAD A FRED'S THAT WE SHOPPED AT ALL THE TIME. IT WAS IN A BAD LOCATION AND NOT WELL ADVERTISED. THEY CLOSED AND WE DO MISS FRED'S. ALOT OF GOOD BUYS
6-27-2008 @ 11:06AM
Parissa said...
Oh My God!!!!! We don't need another Wal-Mart! ... and especially one named 'Freddies!' Their prices are beyond reasonable on many items and their customer service is miserable ~ at least at the one I've shopped in (but do so no longer)! I don't shop Wal-Mart either. I refuse to contribute sales to a store that is wealthier than most nations ... and by dubious means ... and who is powerful enough to actually make or break suppliers and community businesses! I'm only one person, so I know my crusade is rather fruitless ... but now TWO bully stores we must watch out for! Heaven preserve us!
6-28-2008 @ 2:13PM
sandy said...
Fred's - wow- we went to one in Denali, Alaska and found the prices right and the merchandise cheaper and better than Wal-Mart.
6-28-2008 @ 6:15PM
lin said...
I love all you negative commenters. Like customer service is any better anywhere else. I go to walmart for good prices, cheap food and they have everything from potting soil, cheap clothes and SELF CHECKOUT!!! I don't need to be bothered with employees, I do my own shopping and own checking out. :D GO WALMART!
6-28-2008 @ 8:31PM
al said...
Is this the same FRED Meyers we have in the Northwest?, I surley I hope NOT........
6-28-2008 @ 8:53PM
Mike said...
I have been going to Wal-Mart and Sam's Club exclusively for gasoline lately.
At Wal-Mart I can use a shopping card and get a .03 cent per gallon discount. Doesn't sound like much, but it adds up.
At Sam's Club members get .05 cents back.
We took a little weekend vacation last month and I plugged "Wal-Mart" into my GPS. Everytime we needed to get gas, there one was. Worked like a champ! They ought to put a trip planner on their website to help you find their stores and gas stations!
6-28-2008 @ 11:48PM
rginalb said...
walmart is now owned by Freds. There is no difference in who you're giving your money to.
6-29-2008 @ 12:06PM
Kath said...
People are very jealous. Why is it bad to shop at a successful store? Yes, Walmart has problems- but so do most businesses. If the only reason you don't shop there is because they do a lot of business and are 'wealthier than most nations' you need to re-examine your motives. Good grief! From what I can tell after interacting with
many of their employees, Walmart should be applauded for hiring many that no one else will take!
6-29-2008 @ 1:19PM
william lindblad said...
DO NOT underestimate Wal-Mart. They have management that is both aggressive and tenacious when it comes to a buck. I thought they were making an error when they went into the food business. In the event that it has not been noticed they are experimenting with smaller neighborhood stores. They stay in tune with the economy and are slowing U.S. expansion at present. For anyone to move in on them will take years as they have purchasing power with suppliers and stores in many prime locations. They also engage in keeping competition at bay tactics.
6-29-2008 @ 9:09PM
Brian said...
Wal-Mart is not owned by Fred's. God some of you people are just plain STUPID!!! I agree. Every major chain has problems. Not just walmart. I'd much rather go to Wal-Mart any day of the week than to Target or K-Mart. A lot of negatives comments, just tells me you're jealous.
6-30-2008 @ 8:15PM
TERRI-USA said...
All we need is another retailer selling cheap third world made items. When will people learn that retailers like these are causing aour manufacturing to go offshore costing Americans their jobs.
We are living in a semi post-unmanufactorised nation (pardon the English) and all you can see is forclosures, bankruptcies, lower sales taxes resulting in loss of goverment jobs, deteriating housing markets, middle class people living in their cars, increase in robberies and theft. All resulted from people wanted to save a little bit of money by buying cheap imports and companies offshore to earn a larger profit whiler the bottom line is the above mention. We hae discounting our nations prosperity to China while people need work hear. We are reaping of what our low cost buyers have created and now we reap economic destruction!!!!
6-29-2008 @ 11:51PM
bjd said...
Fred's has by far the cheapest prices of any other store...especially on everyday items like toiletries and cleaning supplies. The store is quiet, organized and has extremely friendly salespeople. Can't beat them.
Oh...and who cares about the name? The prices and quality is what matters. At least they are original and haven't tried to gimic-it-up "with the times"...Fred's just pays attention to what's important.
Go Fred's Go!!!
6-30-2008 @ 1:18AM
CRR-Pro said...
Anyone who is not afraid of Wal-Mart, and their already damaging effect on our economy needs to study more. Vlasic and Hanes are just two of the major companies that are nearing bankruptcy because they made supplier deals with Wal-Mart. Don't let the folksie attitude fool you...once Sam Walton was in the ground, his heirs embarked on world dominance, using economies of scale in ways economists never thought of, paying low wages, and not offering health benefits to employees who need it most. A large number of their employees are also on welfare because they don't make enough to support a family. They destroy local economies, putting mom and pop stores out of business. Any good university business school teaches about the evils of their strategies. Every new store employees 250 people, while eventually putting over 300 local people out of work. As they grow, the local economy slowly dies. It is not jealousy, just business sense. The have taken globalization to new heights, while helping to strengten the Asian economy, which uses large amounts of crude oil and copper, thus creating demand-pull inflation, bring oil prices where they are today. As they grow larger, and Asia doea as well, our economy suffers. 75% of what they sell is NOT made by Americans. They force suppliers to move out of the country, taking jobs with them. Wake Up.
6-30-2008 @ 1:30AM
tank said...
The next walmart I dont think so, they just closed a store by me i havent seen walmart close any stores
6-30-2008 @ 1:36AM
rebalol said...
And you can say the same thing about every other corporate store and restaurant out there that you say about Wal Mart. How many of those do you patronize? It always amazes me when I hear people bad mouthing Wal-Mart. Tell us about your spending habits. Do you eat at McDonalds or some other "fast food" restaurant or how about a regular chain; how about shopping at Target, KMart, Macy's, etc... What grocers do you shop at? How many of those businesses put "small" mom and pops out of business? If the mom and pops run their business correctly, they are still around. The ones that aren't failed for a reason that wasn't Wal-Mart's fault but it's easy to blame them for everything that is wrong.
6-30-2008 @ 12:32PM
Bob Wong said...
Anything but Wal-Mart!!!!!!!!!!!!!!!
6-30-2008 @ 5:30AM
ladypacer3 said...
Freds only sells junk.
6-30-2008 @ 6:26AM
marymeakin said...
I shop at Wal-mart as much as I can especially for pharmaceuticals and toiletries; other places are so much higher in price. Our Wal-mart does not have self checkout and they should put some stations in; I prefer to check out myself and do my own bagging. I do not buy fresh meat at Wal-mart though; not good quality and cannot ask butcher for smaller sized packages. Prefer Publix for meats and milk. Clothes at Wal-mart are mostly geared to larger and younger females; however, this is true of most stores around the St. Cloud-Kissimmee, Florida area. Charlotte NC has much better selection of women's clothes and I can find a bigger selection of sizes 6 and 8 and not all female shoppers are under the age of 50. We don't want tight fitting clothes.
6-30-2008 @ 6:28AM
Mary Meakin said...
I shopped at a Fred's in Reidsville, GA once and I remember it as dimly lit and crowded, and not much of a selection. Reminded me of a Dollar General or Family Dollar Store.
6-30-2008 @ 6:31AM
Sunny said...
I work for Wal-Mart. I make GOOD money and I am NOT in management. EVERY employee is eligable for health insurance. Our store is 18 months old and is a super center. Our town has benefited from Wal-Mart. We have NEW STORES opening all the time since Wal-Mart has come here. People come from all over to shop at our store....some come from an hour or more away and when we as associates ask them why they says because your store is the cleaniest friedliest around and the prices for food and general merchandise are the lowest around.
I am a single parent and make more than enough money to support my children on my own with no help from the government. We all have health insurance from Wal-Mart. We have plenty of $$$ after the bills are paid for extra's like amusement parks, vacations, movies, etc. etc.
Don't be jealous...get a job at Wal-Mart and you too can be happy!!!