Fred’s has filed for Chapter 11 bankruptcy protection, and is seeking to enter a debtor-in-possession financing agreement with certain of its existing lenders to raise up to $35 million. The retailer expects to close all its stores within the next 60 days.
The retailer will continue fulfilling prescriptions at most pharmacy locations during the wind-down period, and will continue pursuing the sale of its pharmacies as part of the proceedings. Fred’s also is seeking relief that includes authorization to continue paying employee wages, salaries and benefits without interruption.
“Despite our team’s best efforts, we were not able to avoid this outcome,” said Joe Anto, CEO at Fred’s in a statement. “I want to thank all of our employees for their hard work and continued support of the Company as we wind-down our operations.”
Fred’s has been divesting assets in the wake of the failed merger between Walgreens and Rite Aid, which would have resulted in Fred’s purchasing 865 stores for $965 million. The company sold its EntrustRx specialty pharmacy business to CVS Health for $40 million in May 2018. The pharmacy patient prescription files and related pharmacy assets of 185 Fred’s stores across 10 Southeastern states were purchased by Walgreens for $165 million in September 2018.
This year, the retailer shuttered 312 stores in three rounds of closings between April and June 29, leaving just 244 in operation at the start of July. The company then shut down another 129 underperforming locations over the summer.
Fred’s has been trying to raise money to repay its debt after years of declining sales. In Q1 2019 alone, sales decreased by 5.2%, while same-store sales fell 8.5% and gross profit dropped 16.2% to $74.6 million this year.