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Fred's Reports Higher Third Quarter Earnings

Fred's, Inc. (NASDAQ: FRED) today reported financial results for the third quarter and nine months ended November 2, 2013.

For the third quarter ended November 2, 2013, Fred's net income totaled $7.3 million or $0.20 per diluted share, up 11% from net income of $6.6 million or $0.18 per diluted share in the year-earlier period. Fred's net income for the first nine months of 2013 totaled $22.0 million or $0.60 per diluted share compared with $23.1 million or $0.63 per diluted share in the prior year, which included a benefit of approximately $4.2 million or $0.12 per diluted share for favorable tax credits related to a state income tax settlement as well as adjustments for other tax related assumptions and estimates. Excluding the favorable tax credits, Fred's net income and earnings per diluted share for the first nine months of 2013 increased 18% from the comparable period last year.

Fred's total sales for the third quarter of fiscal 2013 increased 2% to $460.5 million from $450.6 million for the same period last year. Comparable store sales for the quarter increased 1.4% compared with a decline of 2.5% in the third quarter last year. Fred's total sales for the first nine months of fiscal 2013 increased 2% to $1.444 billion from $1.422 billion for the same period last year. Comparable store sales for the first nine months of 2013 increased 1.1% compared with a decrease of 0.8% in the same period last year.

Commenting on the results, Bruce A. Efird, Chief Executive Officer, said, "We are pleased to report an 11% increase in earnings for the third quarter, which reflected the ongoing progress we have seen with our key initiatives for the year. Our Hometown Auto & Hardware department continues to produce strong comparable store sales and the investments in pharmacy growth have been validated by the 8% increase in its total department sales. Notably, our pharmacy department accounted for more than 40% of total company sales during the quarter. To help build on this momentum, we opened our new specialty pharmacy division, EIRIS Health Services, during the third quarter, which accelerates our entry into the fastest growing area of the pharmacy industry. On the expense side of the ledger, the team successfully attained 30 basis points of leverage.

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