Fred's Reports February Sales

Fred's Inc. (NASDAQ: FRED) today reported sales for the four-week month of February, the first month of fiscal 2013, which ended March 2, 2013.

Fred's total sales for the month increased slightly to $159.2 million from $159.0 million in February 2012. Comparable store sales for the month declined 1.5% compared with a decline of 0.7% in the same period last year.

Commenting on the announcement, Bruce A. Efird, Chief Executive Officer, said, "Considering current economic headwinds, including delays encountered with processing tax returns and refunds as well as increased payroll taxes, we were pleased that February sales were within our projected range for the month. General merchandise comparable store sales were positive for the second consecutive month, reflecting good momentum in new initiatives such as an expanded offering in auto/hardware and our discount tobacco shop. We also saw a solid start to our new spring layaway program, and while sales under this program are deferred until final payments are made and therefore not included in February, they would have added 60 basis points to the month's total and comparable store sales. In the pharmacy department, positive script growth continued, but as in previous months, top-line sales were negatively affected by the ongoing brand-to-generic shift. The effect of this shift on total and comparable store sales was 280 basis points in February."

Because of the combination of fourth quarter promotional markdowns on basic and consumable products, as well as year-end adjustments relating to higher-than-anticipated insurance and other operating costs, the Company is reducing its financial guidance for the fourth quarter of 2012. Fred's now expects to report earnings in the range of $0.16 to $0.21 per share for the fourth quarter. Although these adjustments are disappointing, the continued positive results of the auto/hardware expansion will play a major role in the changes we will be implementing in the new year. The Company will release fourth quarter results on March 28, 2013, and during its conference call that day, management will discuss the Company's 2013 reconfiguration program.

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