Fred's Reports September Sales

Fred's Reports September Sales

MEMPHIS, Tenn.--(BUSINESS WIRE)-- Fred's, Inc. (Nasdaq: FRED) today reported sales for the five-week fiscal month and eight-month year-to-date period ended September 29, 2012.

Fred's total sales for the month increased 1% to $170.9 million from $169.5 million in September 2011. Comparable store sales for the month declined 3.8% versus an increase of 1.1% in the same period last year.

Fred's total sales for the year-to-date period increased 3% to $1.282 billion compared with $1.244 billion for the same period last year. On a comparable store basis, year-to-date sales declined 1.2% versus an increase of 0.6% in the same period last year.

Commenting on the announcement, Bruce A. Efird, Chief Executive Officer, said, "In September, we experienced the impact of an accelerated shift in sales of brand-name drugs to generics within the pharmacy department. Clearly, the impact of generic pricing on the major brand conversions was dramatic, with the effect on the overall comparable store sales being more than 300 basis points in September. Historically, market changes occur over a period of six to nine months. Consistent with the most recent conversions, these changes have occurred at a much more rapid pace, involving a period of only 30 to 45 days. On a positive note, pharmacy department script count continued to grow, and the department remains on financial forecast.

"General merchandise sales for tobacco, softlines and fall seasonal products also contributed to the lower comparable store sales for September, with tobacco sales accounting for 75 basis points of the decline," Efird continued. "Our key departments such as Pet, Celebration and Party, Auto, Hardware and Food, performed well during the month. As we look ahead, we are positioned for a positive impact on sales from the increased capital investments and marketing spending that we have planned for the last four months of our year. Anticipating an improvement in general merchandise and recognizing the brand-to-generic shift in the pharmacy, we now expect overall comparable store sales for October and third quarter earnings to be in the previously forecasted range."

During the month, Fred's opened one store, two express pharmacy locations and closed one store.

Fred's, Inc. operates 705 discount general merchandise stores, including 21 franchised Fred's stores, in the southeastern United States. For more information about the Company, visit Fred's website at www.fredsinc.com.

Comments in this news release that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements.These risks and uncertainties include, but are not limited to, general economic trends, changes in consumer demand or purchase patterns, delays or interruptions in the flow of merchandise between the Company's distribution centers and its stores or between the Company's suppliers and same, a disruption in the Company's data processing services, costs and delays in acquiring or developing new store sites, and other contingencies discussed in the Company's Securities and Exchange Commission filings.Fred's undertakes no obligation to release revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.

Fred's, Inc.
Jerry A. Shore, 901-362-3733, Ext. 2217
Executive Vice President and
Chief Financial Officer

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