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Fred's Reports Solid Total Sales For October

Fred's, Inc. (NASDAQ:FRED) today reported sales for the four-week fiscal month, third quarter and nine-month year-to-date period ended October 27, 2012.

Fred's total sales for the month increased 3% to $140.0 million from $136.2 million in October 2011. Comparable store sales for the month declined 0.8% versus an increase of 2.0% in the same period last year.

Total sales for the third quarter of 2012 were $450.6 million, up 1% from $444.4 million in the same period last year. Comparable store sales for the quarter declined 2.5% compared with an increase of 1.5% in the third quarter of 2011.

Fred's total sales for the year-to-date period increased 3% to $1.422 billion compared with $1.381 billion for the same period last year. On a comparable store basis, year-to-date sales declined 0.8% versus an increase of 0.7% in the same period last year.

Commenting on the announcement, Bruce A. Efird, Chief Executive Officer, said, "We were pleased with the response to our increased marketing initiatives that began in October, resulting in positive customer traffic and higher general merchandising comparable store sales. One of our key end-of-year programs was the initiation of a $1 down holiday season layaway program, which dramatically increased layaway sales during the month. However, since layaway sales are not recognized for accounting purposes until final payments are made, the benefit of increased layaway sales, which would have added 150 basis points to total and comparable store sales in October, will be deferred until the fourth quarter. Also, we continued to see growth in script counts in our pharmacy department during October, but this was more than offset by the sales impact of the ongoing brand-name-to-generic conversion. The effect of this shift on total and comparable store sales was 250 basis points in October.

"As we reach the end of the third quarter, we now expect earnings per share to be in the range of $0.18 to $0.23 for the quarter," Efird added. "The reduction in expected earnings from prior estimates reflects the incremental shift in layaway sales, unfavorable LIFO expense charges in the quarter and a single-event increase in insurance reserves, with a combined impact of $0.03 to $0.05 in earnings per share for the quarter. However, with the implementation of several key new merchandising and marketing initiatives in the fourth quarter and the positive impact of the forward shifting of layaway sales and earnings, we continue to project a double-digit earnings per share improvement for 2012, with full-year earnings per share now expected to be in the range of $0.96 to $1.02."

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