Market Overview

Fred's New CEO Could Help The Company Clear A Lowered Bar In The Second Half Of The Year


Fred's, Inc. (NASDAQ: FRED) reported its Q2 results on Tuesday an, while EPS came in ahead of estimates, revenue fell short. On Monday, the company announced that its CEO Jerry Shore was retiring, being replaced by President and COO Michael Bloom.

Patrick McKeever, Managing Director of MKM Partners, reiterated a Neutral rating on the stock, cutting his price target from $13 to $10. Although fundamentals would suggest selling the stock would be the right move, the new CEO and a lowered bar for the second half of the year could slow down the stock’s tumble.

Related Link: Deutsche On Fred's: A Number Of Headwinds With No Near-Term Solutions

The Q2 print was substantially weak, but still slightly ahead of MKM’s forecast. While fundamentals look poor, the firm’s experts “do see some potential catalysts, including sweeping management changes, bold actions at the front-store and in pharmacy, and a sharp cut in guidance that should improve the relative set-up." In addition, the company is planning its first investor day in more than 10 years, scheduled for this fall.

Will The New CEO Help Fred’s Bloom?

The new CEO boasts three decades of small-box experience, having worked for key competing companies CVS Health Corp (NYSE: CVS) and Family Dollar Stores, Inc. (NYSE: FDO).

During his 1.5 years in Fred’s, Bloom had been in charge of the front store, which has not posted strong sales, but has seen its gross margin rate and overall profitability surge.

In addition, Fred’s promoted Craig Barnes to COO – Front Store, and app.

Latest Ratings for FRED

Aug 2017Initiates Coverage OnHold
Jun 2017MaintainsHoldHold
Oct 2016UpgradesSellHold

View More Analyst Ratings for FRED
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Posted-In: MKM MKM PartnersAnalyst Color News Price Target Reiteration Management Analyst Ratings


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