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 5 of 5)
7-29-2008 @ 3:44AM
Mike M. said...
First off, those of you not living in the southeastern United States aren't going to find a Fred's store. Like the article says, Fred's is only in 15 southeastern states. Next point. Why all the negativity towards Fred's, Wal-Mart, K-Mart, Target, or any other store? If any of you know-it-alls can do better, go start your own discount store. Over the years of reading people's on-line comments I've learned to ALWAYS expect two things from the majority of respondents. Those things are: 1) A lot of negativity, and 2) ignorance (sometimes downright stupidity).
8-04-2008 @ 7:50AM
mcccmar45 said...
I love walmart superstores - the prices are right - the stores are clean and the products are of good quality - the only thing they are not good at is fresh produce - and meat - as far as working there - people know going in what the score is - if you dont want to work there - DONT- the bottom line is that it works for the consumer
8-04-2008 @ 1:27PM
Suse said...
I agee with BJD Fred's is cheaper on everything! When I had to care for my mom in Al Fred's discount carried us through for six month's. I don't know how we'd last otherwise. With today's going up on everything Fred's is definitely needed in Orlando Florida
8-04-2008 @ 6:03PM
Ed Cerni said...
Sunny...happy at WalMart. Good for you. A million other people, nay, several million other peope don't share your enthusiasm. Tell me, do you live in a cave?"
8-04-2008 @ 8:17PM
Ed Cerni said...
What a bunch of complainers! Will you pay $4.30 for a gallon for milk at Publix or $3.45 at WalMart?
Tell the truth.....$ counts!!
8-10-2008 @ 12:42PM
Michael said...
I don't know what Wal-Mart you guys are talking about...but I used to work at Store #2. The environment there was very stressful, and the manager was more worried about his pockets than his employees. I didn't make enough there to survive. Sorry, but $6 and hour AFTER the fact of the 40 cent incentives Wal-Mart used to do every so often just couldn't take care of my needs. I worked as an unloader so, it wasn't very often that I got to go out on the floor, if at all! I had a customer stop me while I was pulling new freight to the floor (for the night crew) and a customer asked me if I could help them. Of course I did...that was my job. I asked her why she sounded sort of upset when she asked me...her comment was, "I've been trying to find help for an hour!"
Another thing that made me realize just how much the store takes care of employees is this. At the start of a new fiscal year for the store, we were told that if we reached a goal, by the end of the year we would all get a end of the year bonus. When that time came, we exceeded the stores expectations by a long shot! But, the store manager decided "he" wanted to remodel. The managers all got their bonuses, but the rest lost our bonus as it went to the remodel.
I now work at Fred's. I'm making $6.55 an hour. Granted, it's not much more, but there is no stress working at Fred's, the people I work with are like family to me. Granted, Fred's doesn't sell everything that the other stores do...but there is also something at Fred's you won't find in most other stores...customer service that exceeds expectations. At least I try to at the store here in Arkansas. We actually have customers come to our store and say that the shopping experience at our Fred's is better than at Wal-Mart.
So, I believe that Fred's could give Wal-Mart a run for its money...it would be great for Wal-Mart to have that kind of competition. As long as Fred's doesn't do what Wal-Mart did when Sam passed away...forget where it came from and all the employees that helped get it there!
On a final note...it's hard to find anything in any store that says "Made In The U.S.A." on it anymore since more and more companies are having China make the products considering the fact that for some reason, it's cheaper. But then you lose quality. Just my opinion.
8-19-2008 @ 1:54PM
J Phillips said...
The bottom line is: If you don't like to shop at a certain place, don't. It's not like you have to.
8-29-2008 @ 12:32AM
Robert C Leclair said...
I have been a Walmart shopper longer than I can remember. I have found some bad Walmarts, but most are good. If you have a problem with a Walmart, send a letter to Walmart headquarters in Arkansas. I have done that on a few occasions, and while it took some time, problems were remedied! One Walmart in Florida was in serious condition, and some employees showed a definate lack of interest in the customer, such as "I don't have time to help you look for something" or "Find it yourself"!! I complained to the 'Manager' and he told me to fill out a complaint form and deposit in the 'Complaint Box' at the store. When I sent it instead to Walmart Headguarters, it took several months to get a reply, but they said the problems had been resolved and the next time I made a trip to Florida, I stopped in that same store and asked several employees for help, and they walked me right to the article I requested!!! I then asked to speak to the Manager, and they paged him quickly, and when he came to talk to me, it was a different manager than the last time!!!! He asked me what was wrong, and I told him the whole story from the last visit and that I was now very happy with the way the management and employees were treating the customers!!!!! If any of you Whiners have a problem with a Walmart, follow the correct steps about your grievance and you will probably be well satisfied. "Do unto others"...........