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Fred's Reports September Sales

Fred's, Inc. (NASDAQ:FRED) today reported sales for the five-week fiscal month and eight-month year-to-date period ended September 29, 2012.

Fred's total sales for the month increased 1% to $170.9 million from $169.5 million in September 2011. Comparable store sales for the month declined 3.8% versus an increase of 1.1% in the same period last year.

Fred's total sales for the year-to-date period increased 3% to $1.282 billion compared with $1.244 billion for the same period last year. On a comparable store basis, year-to-date sales declined 1.2% versus an increase of 0.6% in the same period last year.

Commenting on the announcement, Bruce A. Efird, Chief Executive Officer, said, "In September, we experienced the impact of an accelerated shift in sales of brand-name drugs to generics within the pharmacy department. Clearly, the impact of generic pricing on the major brand conversions was dramatic, with the effect on the overall comparable store sales being more than 300 basis points in September. Historically, market changes occur over a period of six to nine months. Consistent with the most recent conversions, these changes have occurred at a much more rapid pace, involving a period of only 30 to 45 days. On a positive note, pharmacy department script count continued to grow, and the department remains on financial forecast.

"General merchandise sales for tobacco, softlines and fall seasonal products also contributed to the lower comparable store sales for September, with tobacco sales accounting for 75 basis points of the decline," Efird continued. "Our key departments such as Pet, Celebration and Party, Auto, Hardware and Food, performed well during the month. As we look ahead, we are positioned for a positive impact on sales from the increased capital investments and marketing spending that we have planned for the last four months of our year. Anticipating an improvement in general merchandise and recognizing the brand-to-generic shift in the pharmacy, we now expect overall comparable store sales for October and third quarter earnings to be in the previously forecasted range."

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