Fred's Reports December Sales

PRESS RELEASE

MEMPHIS, Tenn. (January 8, 2015) — Fred's Inc. (NASDAQ: FRED) today reported sales for the five-week fiscal month of December and the 11-month year-to-date period ended January 3, 2015.

Fred's total sales for the month increased 1% to $210.7 million from $209.1 million in December 2013. Comparable store sales for the month declined 1.4% versus an increase of 1.4% for the same period last year.

Fred's total sales for the year-to-date period increased 1% to $1.830 billion from $1.805 billion for the same period last year. On a comparable store basis, year-to-date sales decreased 1.0% versus an increase of 0.9% for the year-earlier period.

Commenting on the announcement, Jerry A. Shore, Chief Executive Officer, said, "December sales in our pharmacy department continued to do well, with a solid performance in terms of script and sales growth. Specialty pharmacy sales also continued to grow and reached record levels in December. However, we did not meet our general merchandising marketing plan, which resulted in lower traffic and comparable sales for December. The marketing initiatives for general merchandising that we put in place last summer delivered good results during the first five months after implementation; however, as we ran into our competitors' very aggressive marketing programs at the end of the third quarter and into the fourth quarter, traffic suffered. Unfortunately, given the required lead times on our advertising circulars, we could not effectively adjust to that unfolding competitive environment. We will, however, be able to refine our holiday merchandise and marketing programs for 2015, having now named a new General Merchandise Manager and with the expected selection of a new President and Chief Operating Officer during the next few weeks.

"Management's efforts have been concentrated on driving traffic in 2015 and restoring profitability," Shore continued. "The team has installed multiple process improvements and buying disciplines, which along with our efforts to strengthen key management roles, will help ensure that we successfully execute our strategic and operating plans in 2015. We are looking forward to 2015 and the realization of the benefits from the process changes that took place in 2014, the new skills and qualifications added to our team, and revisions to our store layout and marketing programs. These changes in the way we approach our business will be key drivers of stronger financial returns in 2015."

During December, Fred's opened two full-service store locations and four Xpress locations.

Fred's also closed 47 full-service store locations in line with our reconfiguration plan.