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Fred’s Reports 9% Higher April Sales

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Fred’s Inc. (NASDAQ:FRED) today reported sales for the four-week month of April ended May 2, 2015, and the first quarter of fiscal 2015.

Fred’s total sales for April increased 9% to $163.3 million from $149.8 million in April 2014. Fred’s sales for the prior-year month included sales of $6.0 million from 62 stores closed mainly in late 2014 pursuant to the Company’s reconfiguration plan. Excluding last year’s April sales from closed locations, total sales increased 14% for the month. Despite the effects of the recent West Coast shipping strike, abnormally cold weather in the Company’s region and the impact of an earlier Easter, comparable store sales for the month increased 0.7% compared with a decrease of 2.3% in April of last year.

To account for the timing difference of an earlier Easter this year, which pushed holiday-related sales into March this year versus April last year, combined March and April total sales increased 5% to $356.8 from $340.8 in the same period last year. Excluding sales from the stores closed in 2014, total sales increased 9% over the same two-month period in 2014.

Fred’s total sales for the first three months of fiscal 2015 increased 2% to $510.1 million compared with $498.3 million for the same period last year. Excluding sales of $21.8 million from closed stores in 2014, total sales increased 7% for the first quarter of 2015. On a comparable store basis, year-to-date sales increased 0.8% versus a 1.9% decrease for the year-earlier period.

Commenting on the announcement, Jerry A. Shore, Chief Executive Officer, said, “We are pleased that comparable sales for the first quarter were in line with our guidance and we welcome the boost provided by our recent EntrustRx acquisition in terms of specialty pharmacy sales. As specialty pharmacy sales expand as a percentage of total sales, we reiterate that they typically carry lower margins compared with retail pharmacy sales. The pharmacy department has continued to experience positive comparable store sales and total script growth, while general merchandise sales did not follow the positive trend of sales to plan experienced in February and March. We anticipate that general merchandise departments will improve throughout the year as new merchandising and marketing strategies are implemented, and on a positive note, our average basket continues to increase. We remain confident in our strategic plan and the team’s ability to execute the initiatives put forth, which go beyond just product merchandising to include a revision of the supply chain, a revamped marketing strategy, aggressive upgrading of talent, and moving technology to the cloud to enhance data-based decision making – all focused on reducing cost and driving EBITDA while improving the customer experience. Taken together, the positive signs we saw in sales during the first quarter bode well for our company’s future performance.

“Given the impact of below-plan sales in retail pharmacy (excluding specialty pharmacy), most of which was driven by the continued pressure on reimbursement rates and general merchandise’s slow April, along with costs associated with the acquisition, we now expect that first quarter earnings will be flat to down slightly compared with the first quarter of 2014,” Shore continued. “Although these results for the first quarter are not as we planned, we continue to see progress and are confident that we are executing the initiatives at the right pace. We believe the stronger momentum developing in our business will continue and we remain committed to our annual guidance.”

During April, Fred’s opened two Xpress pharmacy locations and two specialty pharmacy locations.

Fred’s operates 663 discount general merchandise stores, including 19 franchised Fred’s stores, and three specialty pharmacy locations in the southeastern United States. 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; 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.

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