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Fred's Second Quarter 2012 EPS Increased 31%

Operating income for the second quarter of 2012 was $3.4 million or 0.7% of sales compared with $8.3 million or 1.8% of sales in the prior-year period. For the first half of 2012, operating income was $20.5 million or 2.1% of sales from $23.4 million or 2.5% of sales in the first half of 2011.

Through the first half of the year, the Company opened 12 new locations, consisting of six new stores and six new Xpress pharmacies. Fred's also closed 14 locations during this period.

In the third quarter of 2012, the Company expects total sales to increase in the range of 2% to 4%. Comparable store sales are expected to decline in the range of 1% to 3% versus an increase of 1.5% in the third quarter last year. Third quarter 2012 earnings per diluted share are forecasted to be in the range of $0.22 to $0.26 compared with earnings per diluted share of $0.24 in the same period last year. Based on results for the first half of 2012 and this outlook, the Company now expects total earnings per diluted share for 2012 to be in the range of $0.97 to $1.04.

Currently, Fred's, Inc. operates 698 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.

A public, listen-only simulcast and replay of Fred's second quarter 2012 conference call may be accessed at the Company's web site or at www.earnings.com. The simulcast will begin at approximately 10:00 a.m. Eastern Time today; a replay of the call will be available beginning at approximately 1:00 p.m. Eastern Time and will run until September 23, 2012.

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, those associated with the Company's announced strategic plan, 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; 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.

Unaudited Financial Highlights

(In thousands, except per share amounts)
 

 

13 Weeks Ended July 28, 2012

13 WeeksEndedJuly 30,2011

PercentChange
Net sales $ 470,816 $ 452,690 4.0 %
Operating income $ 3,366 $ 8,268 (59.3 )%
Net income $ 6,054 $ 5,086 19.0 %
Net income per share:
Basic $ 0.17 $ 0.13 30.8 %
Diluted $ 0.17 $ 0.13 30.8 %
Average shares outstanding:
Basic 36,493 39,134
Diluted 36,621 39,247
 
     

 

26 Weeks Ended July 28, 2012

26 WeeksEndedJuly 30,2011

PercentChange
Net sales $ 971,321 $ 937,089 3.7 %
Operating income $ 20,467 $ 23,391 (12.5 )%
Net income $ 16,512 $ 14,600 13.1 %
Net income per share:
Basic $ 0.45 $ 0.37 21.6 %
Diluted $ 0.45 $ 0.37 21.6 %
Average shares outstanding:
Basic 36,738 39,118
Diluted 36,871 39,222
 

       

FRED’S, INC.

Unaudited Fiscal 2012 Second Quarter Results

(in thousands, except per share amounts)
 

13 Weeks Ended July 28, 2012

% of Total

13 WeeksEndedJuly 30,2011

% ofTotal
Net sales $ 470,816 100.0 % $ 452,690 100.0 %
Cost of goods sold   339,058   72.0 %   325,759 72.0  
Gross profit 131,758 28.0 % 126,931 28.0
Depreciation & amortization 9,474 2.0 % 8,076 1.8
Selling, general and administrative expenses   118,918   25.3 %   110,587 24.4  
Operating income 3,366 0.7 % 8,268 1.8
Interest expense, net   136   0.0 %   93 0.0  
Income before income taxes 3,230 0.7 % 8,175 1.8
Provision for income taxes   (2,824 ) (0.6 )%   3,089 0.7  
Net income $ 6,054   1.3 % $ 5,086 1.1 %
Net income per share:
Basic $ 0.17 $ 0.13
Diluted $ 0.17 $ 0.13
Weighted average shares outstanding:
Basic 36,493 39,134
Diluted 36,621 39,247
 
       

Unaudited Fiscal 2012 Six-month Results

(in thousands, except per share amounts)
 

26 Weeks Ended July 28, 2012

% of Total

26 WeeksEndedJuly 30,2011

% ofTotal
Net sales $ 971,321 100.0 % $ 937,089 100.0 %
Cost of goods sold   691,721 71.2 %   672,216 71.7  
Gross profit 279,600 28.8 % 264,873 28.3
Depreciation & amortization 18,838 1.9 % 15,849 1.7
Selling, general and administrative expenses   240,295 24.8 %   225,633 24.1  
Operating Income 20,467 2.1 % 23,391 2.5
Interest expense, net   273 0.0 %   163 0.0  
Income before income taxes 20,194 2.1 % 23,228 2.5
Provision for income taxes   3,682 0.4 %   8,628 0.9  
Net income $ 16,512 1.7 % $ 14,600 1.6 %
Net income per share:
Basic $ 0.45 $ 0.37
Diluted $ 0.45 $ 0.37
Weighted average shares outstanding:
Basic 36,738 39,118
Diluted 36,871 39,222
 

   

FRED'S, INC.

Unaudited Balance Sheet

(in thousands)
 

 

July 28, 2012

July 30,2011
ASSETS:
Cash and cash equivalents $ 23,123 $ 46,799
Inventories 340,109 325,438
Receivables 29,601 28,727
Other non-trade receivables 32,850 25,457
Prepaid expenses and other current assets   6,798   10,595
Total current assets 432,481 437,016
Property and equipment, net 158,453 157,774
Intangibles 35,360 21,716
Other non-current assets   3,276   3,221
Total assets $ 629,570 $ 619,727
 
LIABILITIES AND SHAREHOLDERS' EQUITY:
Accounts payable $ 103,105 $ 97,512
Current portion of indebtedness 1,614 360
Current portion of capital lease obligation - 131
Accrued expenses and other 44,719 43,728
Deferred income taxes   24,374   22,245
Total current liabilities 173,812 163,976
 
Long-term portion of indebtedness 5,509 7,107
Deferred income taxes 6,298 1,702
Other non-current liabilities   15,746   17,149
Total liabilities 201,365 189,934
Shareholders' equity   428,205   429,793
Total liabilities and shareholders' equity $ 629,570 $ 619,727
 

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