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October sales up at Fred’s, but discounter prepping for tough holiday with tighter inventory and targeted promos

BY Michael Johnsen

MEMPHIS, Tenn. — Fred’s Super Dollar on Thursday reported sales gains for the four weeks ended Nov. 2, reaching $143.4 million on 2% growth. Comparable store sales for the month increased 0.8% versus a decline of 0.8% in the same period last year.

"Sales for October were at the lower end of our guidance as general merchandise sales were sluggish and consumable driven," commented Bruce Efird, Fred’s CEO. "Poor weather around Halloween hurt sales and consumers tightened spending during the recent budget crisis, with the combination affecting sales and gross margins in the back half of the month," he suggested. "On the positive side, we experienced strong pharmacy sales and a solid performance from our reconfigured departments, especially Hometown Auto & Hardware." Efird noted that reported sales also were reduced by higher comparable layaway sales, which are not recognized for accounting purposes. 

Total sales for the third quarter of 2013 were $460.5 million, up 2%. And comparable store sales for the quarter increased 1.4% compared with a decline of 2.5% in the third quarter of 2012.

Fred’s is now expecting third quarter earnings to be up 5% to 10% over last year. "Forecasts for the upcoming holiday season project a very tough retail environment," Efird said. "In anticipation of these challenges, Fred’s merchandising team has maintained inventories at or below last year’s levels and has initiated an aggressive and targeted marketing program for the fourth quarter."

During the month, Fred’s opened two stores with relocated pharmacies and closed one Xpress pharmacy locations.

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Bitcoin gains popularity among retailers

BY Alaric DeArment

NEW YORK — Once dismissed as belonging to the realm of techno-utopians and anti-government libertarians, bitcoin has lately grown in popularity among investors and retailers. Could it find acceptance among drug stores as well?

Bitcoin has certainly received its fair share of press lately, as well as attention from investors like Cameron and Tyler Winklevoss and retailers ranging from a newly opened pet store in New York and bars and restaurants to an online seller of traditional Chinese medicine and a Dutch website that processes delivery orders for restaurants. A coffee shop in Vancouver, British Columbia, even installed a special ATM that exchanges bitcoins for cash, and the dating website OkCupid accepts them as well.

Theorized in a 2008 paper by an obscure person or group – nobody really knows for sure – called "Satoshi Nakamoto" and introduced at the beginning of 2009, bitcoin is essentially a peer-to-peer system that allows direct payments between two parties who store their bitcoins in electronic wallets, protected by a system of cryptography, private keys and electronic signatures; like cash, bitcoins can be stolen, but unlike cash, they can’t be counterfeited. On top of that, they’re virtually anonymous. New bitcoins are "mined" by programming a computer to solve increasingly complex math problems that require even more computing power, thus creating a finite supply of bitcoins.

Charles Hoskinson, director of the Bitcoin Education Project, told DSN the currency has a lot of potential for use in retail, but given infrastructural limitations, particularly a lack of support on current point-of-sale hardware and software, it’s better suited for small independent retailers – including independent drug stores – than for national chains, though that could change in the near future. For now, it could be a way for independent drug stores to set themselves apart from the rest.

"If you’re a mom-and-pop drug store, you’re not going to be able to beat Walgreens on margin, so you’re going to need to beat them on customer service and differentiation," Hoskinson said. But a nationwide chain could find also find bitcoins more attractive in the next few years as more sophisticated ways to accept it as point-of-sale systems are updated. Hoskinson cited near-field communication systems like Google Wallet as an example of the ways people could use bitcoins to pay for items at the point of sale.

What could make bitcoin even more attractive are its margins, particularly its lower fees. One company, BitPay, allows retailers to accept bitcoins for a fee of 1%, compared with the 2-3% fees common among credit cards. While credit cards’ higher fees may not be a big deal for products that cost $30 or more, Hoskinson said, they can destroy margins on lower-cost items. Another company, BitFash, launched in January by investors in Australia and China, allows consumers to use bitcoins to buy clothing from brands like Forever 21 and Zara.

The downside of bitcoin is its volatility. In December 2012, one bitcoin was worth $12.65. As of Wednesday afternoon, it was up to $262, and it had experienced numerous surges and crashes in the interim, leading many to regard it as an asset bubble. In one recent case, a Norwegian man who had invested less than $30 in 5,000 bitcoins in 2009 and forgotten them dug them up on his computer and found they were worth $886,000. Nevertheless, after hitting a peak of $266 on April 10, the value dropped by more than 50% in only a few hours amid panicked selling when the main exchange, Mt. Gox, had difficulty processing a higher than normal trade volume.

BitPay seeks to overcome that volatility by calculating the bitcoin-to-dollar exchange rate in real time and not requiring merchants to actually hold bitcoins.

It also has a bit of an image problem. For some, the association between the words "bitcoin" and "drug" might be a dubious one. On Oct. 1, the FBI arrested 29-year-old Ross William Ulbricht in San Francisco and shut down his e-commerce site, Silk Road, seizing $28 million in bitcoins in the process. Silk Road, which existed in a hidden, anonymous portion of the Internet known as the Deep Web or Darknet, accessible only through a special web browser called Tor, allowed users to openly buy and sell illegal drugs using bitcoins. Reuters reported Wednesday, however, that a new Silk Road website had debuted with the same name and appearance as the old one.

But CoinDesk, an online magazine that covers bitcoin and other digital currencies, lists the notion that bitcoins exist only for illegal activities first amid other examples of what it calls "bitcoin baloney." And as its growing adoption by serious investors and retailers shows, the digital currency is gaining, well, currency.

"I wouldn’t advise pharmacies or brick-and-mortar retailers – unless they’re small – to get involved with bitcoin just yet, but it’s going to become much easier in the next two to three years," Hoskinson said, adding that it is currently best suited for e-commerce and international purchases. "But for online transactions, there’s where the magic is happening. It’s designed to be Internet money."

Image source: Wikimedia Foundation

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B.Goss says:
Nov-07-2013 04:52 pm

As Charles points out, with the right customer base, Bitcoin can help smaller drug stores stand out on the customer service level -- particularly when it comes to privacy. As a physician, I'm acutely aware of how important privacy is, but I'm not so sure my patient's credit card companies are. For example, my wife started getting baby formula samples in the mail while we were trying to get pregnant (and buying home pregnancy tests at our local drug store). Coincidence? Or credit card data mining in action? If a patient wants to fill a prescription for a psychiatric medication or a contraceptive, but would prefer not to leave such a paper trail, what options are there? Cash would work -- but not so well for a 3 month supply by mail order. For tech savvy, privacy minded consumers, Bitcoin can provide the convenience of a credit card with the privacy of cash. There are some things that should remain private between a patient, their physician, and their pharmacist; Bitcoin can help keep it that way.

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Kmart to roll out lease-to-own program later this month

BY Alaric DeArment

HOFFMAN ESTATES, Ill. — Mass merchandiser Kmart is planning to roll out lease-to-own financing at stores around the country this holiday season, the Sears Holdings-owned chain said Wednesday.

The retailer began testing the program in mid-October and plans to make it available in all stores by Nov. 22. Customers will be able to take home items priced at $150 and more for no credit, including appliances, mattresses, furniture, lawn and garden equipment, consumer electronics, service plans and others. To qualify, customers must be at least 18 years old, earn at least $1,000 per month and supply a social security or tax identification number when applying.

"Kmart’s lease-to-own program will help ease some of the financial barriers our members and customers will face this holiday season," Sears Holdings VP financial services Jai Holtz said. "For members and customers who have an immediate need, lease-to-own gives a full-house assortment of products and a way to pay."

 

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