Market Overview

Fred's Reports October Sales and Sets Date to Release November Sales and Third Quarter Financial Results


Fred's Inc. (NASDAQ: FRED) today reported sales for the four-week fiscal month of October, third quarter and nine-month year-to-date period ended on October 29, 2016.

Fred's total sales for the month decreased 4.2% to $157.3 million from $164.2 million in October 2015. Comparable store sales for the month declined 3.4% compared with an increase of 2.3% in the year-earlier period.

Total sales for the third quarter of 2016 were $516.7 million, down 4.5% from $541.0 million in the same period last year. Comparable store sales for the quarter declined 3.8% compared with an increase of 2.7% in the third quarter of 2015.

Fred's total sales for the year-to-date period were flat at $1.596 billion versus $1.596 billion for the same period last year. On a comparable store basis, year-to-date sales declined 1.7% versus an increase of 1.5% for the year-earlier period.

Commenting on the announcement, Michael K. Bloom, Chief Executive Officer, said, "While we continue to make broad progress in addressing the issues that have affected our sales over the past several months, these improvements were obscured primarily by four discrete factors in October that prevented us from hitting our sales expectations for the month. In the front store, we encountered unexpected challenges in our transition to a third-party distributor for several key categories. October sales also were affected by the calendar shift for Halloween, as we cautioned last month, which pushed the holiday into the fiscal month of November this year versus October last year. Significant reductions in SNAP payments and warmer-than-expected weather during the month also contributed to October's sales decline. Retail pharmacy sales continued to be pressured by the ongoing shift to 90-day prescriptions, as expected, but our specialty pharmacy sales, while still running below last year's level due to an industry-wide slowdown in Hepatitis C drugs, gained further ground in October with month-over-month growth. Outside of these headwinds, which we consider to be transitory, as well as the tough comparisons we have faced against last year's sales, we remain confident in the strategic path for Fred's. With the key initiatives we have in place to drive future growth and improve profitability, we continue to make bold strategic shifts in our business."

Due in part to current revenue trends and the evolving nature of the Company's business, including the optimization of its store fleet and other initiatives that management plans to discuss in greater detail at analyst day next month, Fred's is suspending its previously issued guidance for the second half of 2016, which should no longer be relied upon, as it does not reflect management's vision for the future of Fred's. The suspension of guidance does not impact management's continued confidence in the Company's ability to deliver improved shareholder value via an enhanced operating platform positioned for growth. Management looks forward to providing additional details next month during analyst day presentations.

Separately, Fred's also announced that, in conjunction with its analyst day meeting next month in New York City, the Company will release its November sales together with financial results for the third quarter ended October 29, 2016, before the market opens on Friday, December 2, 2016. During the analyst day presentation, which begins at 8:30 a.m. EST that day and will stream live over the web, management will comment on Fred's operations and performance for the quarter, among other topics. A link to the event will be available at under investor relations.

Fred's analyst day is expected to conclude at 12:00 noon EST. An online replay will be available approximately two hours following the conclusion of the live broadcast and will continue through January 2, 2017.

Fred's, Inc. and subsidiaries operate 648 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 370 full service pharmacy departments located within Fred's stores, including four franchised locations. For more information about the Company, visit Fred's website at

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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