MEMPHIS, Tenn. (January 9, 2008) ñ Fred's Inc. (NASDAQ:FRED) today reported sales for the five-week fiscal month of December and the 11-month period ended January 5,Ý2008.

Fred's total sales for the month declined to $210.0 million from $221.5 million in December 2006. Total sales were adversely affected by fewer pre-Christmas shopping days in the fiscal December month this year. Comparable store sales for December declined 1.8% compared with a 2.0% increase in the same month last year.

Total sales for the year-to-date period increased 3% to a record $1.65 billion from $1.60 billion in the first 11 months of 2007. On a comparable store basis, year-to-date sales for 2007 increased 0.4% versus a 2.4% gain in the same period last year.

Commenting on the announcement, Michael J. Hayes, Chief Executive Officer, said, "As has been the case for months, the retail environment continues to be pressured by mounting economic concerns, keeping customers conservative in their spending. Because of these weaker conditions, our sales for December came in at the low end of our revised plan for the month, which foresaw comparable store sales declining as much as 2%. In addition, December sales reflected a more promotion-driven customer, leading to higher-than-planned markdowns across most of our product categories. The impact of December's lower sales and accelerated markdowns are expected to reduce our fourth quarter earnings by five cents."

Hayes noted that Fred's opened two stores and one pharmacy in December.

Fred's Inc. operates 715 discount general merchandise stores, including 24 franchised Fred's stores in the southeastern United States. For more information about the Company, visit Fred's Website at www.fredsinc.com.

Comments in this news release that are not historical facts are forward-looking statements that involve risks and uncertainties that could cause actual results to differ materially from those projected in the forward-looking statements. Theserisks and uncertainties include, but are not limited to, general economic trends, changes in consumer demand or purchase patterns, delays or interruptions in the flow of merchandise between the Company's distribution centers and its stores or between the Company's suppliers and same, a disruption in the Company's data processing services, costs and delays in acquiring or developing new store sites, and other contingencies discussed in the Company's Securities and Exchange Commission filings. Fred's undertakes no obligation to release revisions to these forward-looking statements to reflect events or circumstances after the date hereof or to reflect the occurrence of unforeseen events, except as required to be reported under the rules and regulations of the Securities and Exchange Commission.