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Fred's Reports December Sales

Fred's Inc. (NASDAQ: FRED) today reported sales for the five-week fiscal month and 11-month year-to-date period ended December 29, 2012.

Fred's total sales for the month declined 1% to $209.9 million from $213.0 million in December 2011. Comparable store sales for the month decreased 4.2% compared with a decline of 0.4% in the same period last year.

Fred's total sales for the year-to-date period increased 2% to $1.782 billion compared with $1.747 billion in the same period last year. On a comparable store basis, year-to-date sales declined 1.4% versus an increase of 0.7% in the same period last year.

Commenting on the announcement, Bruce A. Efird, Chief Executive Officer, said, "December sales did not meet our expectations as customers limited their purchases of discretionary and weather-related merchandise again this month. The economic headwinds around the holidays overshadowed some of the positive aspects of the Company's performance in December, like the successful completion of our layaway sales program and continued script improvement in our pharmacy department." Efird said that, with the sales shortfall Fred's experienced in November and December, the Company now expects fourth quarter earnings per share to be in the range of $0.25 to $0.31.

"Looking ahead, we begin 2013 with many new programs and initiatives designed to improve customer traffic," Efird continued. "We will accelerate pharmacy growth through expanded programs in specialty drugs and clinical services, as well as by increasing the pace of pharmacy acquisitions. In general merchandise departments, we expect a positive impact from discount tobacco programs and our new Hometown Auto and Hardware program, which will grow from 80 to 200 stores in 2013. We also are expanding the merchandise assortment in our seasonal departments, designed to complement the new hardware program, and we are upgrading the Home categories of our Core 5 Program.

"We expect that 2013 will be a springboard year for Fred's with the expansion of specialty drugs and clinical services, accelerated pharmacy acquisitions, new auto and hardware product initiatives, the rollout of a smaller drug and dollar store concept, and the beginning of the relocation of approximately 125 stores," Efird added. "Our team is confident these programs will get Fred's back to positive comparable sales and traffic in the upcoming year."

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