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CONTACT: FRED'S REPORTS SALES FOR JANUARY AND FISCAL YEAR 2006 JANUARY COMPARABLE STORE SALES INCREASE 2.4% MEMPHIS, Tenn. (February 8, 2007) – Fred's Inc. (NASDAQ:FRED) today reported sales for five-week month of January and 53-week fiscal year 2006, which ended February 3, 2007, versus four-week and 52-week year-earlier periods. On an unadjusted basis, total sales increased 48% for January, 17% for the fourth quarter, and 11% for fiscal 2006, all reflecting an extra week this year. To make sales results for January and fiscal 2006 comparable with those of the prior year, the Company adds the week ended February 4, 2006, to the prior-year results to obtain similar five- and 53-week periods. On this adjusted basis, comparable store sales for January increased 2.4%. Fred's total sales for January 2007 rose 8% to $163.9 million compared with $152.4 million for the pro forma five-week year-earlier period. On the adjusted basis, fourth quarter total sales increased 8% and comparable store sales increased 2.0%. Total sales for fiscal 2006 increased 8% to a record $1.77 billion versus $1.63 billion for the 53-week pro forma period ended February 4, 2006. On a comparable store basis, sales for 2006 increased 2.4% versus a 1.2% gain last year. Fred's reported sales for the four- and 52-week periods ended January 28, 2006, were $111.9 million and $1.59 billion, respectively. Commenting on these results, Michael J. Hayes, Chief Executive Officer, said, "We are pleased to have ended the year with solid sales growth, as comparable store sales gained some momentum over December, with the regions affected by last year's hurricane rebounding. "In planning for 2007, we have increased our advertising programs and have started the roll-out of our refresher program to 500 stores, while evaluating two pieces of upcoming legislation that are expected to have a major impact on the upcoming year." Hayes continued. The first is the new pricing structure for generic drugs for Medicaid, which was scheduled to begin in January and is expected to lower reimbursement rates. We now anticipate this change will take effect in the second or third quarter of 2007. The other factor is proposed legislation that would raise the minimum wage to $7.25 per hour. Our past experience has shown that, while the wage hike affects our own operating costs initially, such wage increases have had a positive impact on our sales and our customers' spending habits over the longer term as higher wages begin to translate into increased disposable income. "With these opportunities, issues and timing in mind, we are comfortable with the mean estimate of $0.20 per share for first quarter earnings," Hayes added. "We will outline further guidance for 2007 when we release 2006 year-end results on March 22." Fred's Inc. operates 700 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 which could cause actual results to differ materially from those projected in the forward-looking statements. These risks 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.
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