Market Overview

Fred's Reports September Sales

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

Fred's Inc. (NASDAQ: FRED) today reported sales for the five-week fiscal month of September and eight-month year-to-date period ended on October 1, 2016.

Fred's total sales for the month decreased 5.5% to $199.9 million from $211.4 million in September 2015. Comparable store sales for the month decreased 4.9% compared with an increase of 4.2% in the year-earlier period.

Fred's total sales for the year-to-date period increased 0.5% to $1.439 billion from $1.432 billion for the same period last year. On a comparable store basis, year-to-date sales decreased 1.5% versus an increase of 1.3% for the year-earlier period.

Commenting on the announcement, Michael K. Bloom, Chief Executive Officer, said, "September sales faced a tough year-over-year comparison. The front store also experienced calendar shifts for federal assistance payments, continued substantial reductions in SNAP payments, and an increased impact related to competitive pricing strategies, particularly in consumables categories. Retail pharmacy performed consistent with recent trends and continued to be pressured by the shift to 90-day prescriptions. On the other hand, specialty pharmacy, while experiencing low-single-digit negative comparable sales due to an industry wide slowdown in Hepatitis C drugs, is continuing its steady consecutive month-over-month growth.

"As we pointed out in our quarterly update last month," Bloom continued, "our key areas of emphasis going forward will be to optimize our store fleet and supply chain, focus on markets where we are strong, and make additional investments in marketing and technology, all to drive growth with discipline. A significant number of our stores are performing well, experiencing positive or at least flat comparable store sales. We have identified our weaker markets and are working to mitigate their business trends. We know we can be the best in the markets we serve, we know our customers' needs, and we know we can deliver access to pharmacy and healthcare services as well as a broad, value-based assortment of products. These are highly differentiating competitive advantages for Fred's, and we know they resonate with our customers."

Bloom noted that the Company's fiscal month of October will end on October 29 this year versus October 31 last year. As a result, last-minute Halloween sales will fall into the November reporting period this year.

Additionally, the Company announced that it will host an investor day in New York City on the morning of Friday, December 2, 2016. The event will be webcasted. Agenda specifics and other details will be available later.

Fred's, Inc. and subsidiaries operate 649 discount general merchandise stores and three specialty pharmacy-only locations in 15 states in the southeastern United States. Included in the store count are 18 franchised locations. Also, there are 371 full service pharmacy departments located within Fred's stores, including four franchised locations. 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; cyber-security threats; 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.
Rick Hans, 901-362-3733, Ext. 2232
Executive Vice President and Chief Financial Officer

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