Market Overview

Fred's Reports 12% Higher June Sales

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MEMPHIS, Tenn.--(BUSINESS WIRE)--

Fred's Inc. (NASDAQ: FRED) today reported sales for the five-week month of June, which ended July 4, 2015.

Fred's total sales for the month increased 12% to $212.9 million from $190.8 million in June 2014. Excluding $7.4 million from last year's June sales for 56 subsequently closed locations, total sales increased 16% for the month. Comparable store sales for the month increased 1.6% compared with a decrease of 0.6% in the same period last year.

Fred's total sales for the first five months of fiscal 2015 increased 6% to $889.1 million from $840.5 million for the same period last year. Excluding sales of $35.2 million from closed stores in 2014, total sales increased 10% for the first five months of 2015. On a comparable store basis, year-to-date sales increased 0.8% versus a decline of 1.3% for the year-earlier period.

Commenting on the announcement, Jerry A. Shore, Chief Executive Officer, said, "The strong sales growth we experienced during June continued to reflect the recent expansion of our specialty pharmacy business, which accounted for approximately 11% of total sales. June also benefited from a favorable calendar shift at the beginning of the month, improved performance from our advertising changes and new products in our stores. On a comparable store basis, June sales were on the lower end of our expectations, reflecting softer retail pharmacy department script volume and increasing reimbursement rate pressures associated with preferred Medicare Part D networks, which affects both sales and margins. On the other hand, general merchandise sales showed improvement in June and, on a comparable store basis, were flat for the month.

"Our team remains focused on initiatives to drive stronger sales and operating performance," Shore continued. "Gross margin pressure in our retail pharmacy department has accelerated this year and is changing the landscape of the industry. We have engaged A. T. Kearney, a leading management and drug sector consulting firm, to help our team map out a more aggressive strategy and take steps to address these industry-wide issues. Alternatively, our EntrustRx specialty pharmacy business continues to achieve its financial goals. In our general merchandise retail business, we are pleased with the headway made so far with product assortment and marketing programs, as well as our work to improve supply chain and store operations. Our outlook for continued progress remains positive as momentum builds around our initiatives, which in turn will lead to strong financial performance in the future."

During June, Fred's closed one Xpress pharmacy location.

Fred's operates 662 discount general merchandise stores and three specialty pharmacy-only locations 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. A reader can identify forward-looking statements because they are not limited to historical facts or they use such words as "outlook," "guidance," "may," "should," "could," "believe," "anticipate," "plan," "expect," "estimate," "forecast," "goal," "intend," "committed," "continue," or "will likely result" and similar expressions that concern the Company's strategy, plans, intentions or beliefs about future occurrences or results. These risks and uncertainties include, but are not limited to, those associated with the Company's announced strategic plan, the ultimate terms of the reworked pharmacy distribution agreement, lease buyouts and the underlying assumptions and projections upon which they are based, as well as risks that intended results may not be achieved or may not occur as quickly as expected; the success of announced acquisition activities and future growth trends in businesses acquired; 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 the factors listed under "Risk Factors" in the Company's most recent Annual Report on Form 10-K and any subsequent quarterly filings on Form 10-Q filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date made. 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
Chief Executive Officer

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