MEMPHIS, Tenn. (July 12, 2007) – Fred's Inc. (NASDAQ:FRED) today reported record sales for the five-week fiscal month of June, which ended July 7, 2007, versus the five-week period last year that ended July 1, 2006.

Fred's total sales for June rose 4% to $166.2 million from $160.2 million in the same month last year. Comparable store sales for the month increased 1.5% versus an increase of 2.6% in June 2006.

Total sales for the first five months of fiscal 2007 increased to $740.8 million, up 5% from $704.5 million in the year-earlier period. On a comparable store basis, year-to-date sales increased 1.5% versus the same period last year, when Fred's posted a 2.4% gain in comparable store sales.

Commenting on the announcement, Michael J. Hayes, Chief Executive Officer, said, "Even though we ended our fiscal month with strong sales over the Fourth of July holiday period, overall sales results for June were below our expectations, with most of the weakness occurring in the last week of the calendar month. As we discovered in May, a major aspect of the slowdown in our comparable sales performance relates to the continuing shift to and introduction of generic drugs, which carry much lower retail prices. While this has a negative impact on our pharmacy and company comparable sales, it has a neutral-to-positive effect on our bottom line because of the increased margin on generics. Also, our apparel departments continued to under-perform against prior-year comparable sales because of our decision to exit boys and girls clothing and implement our merchandise refresher program. We remain excited about the continuing progress and results of our refresher program, which has now been implemented in more than 230 of our stores. Although we faced a roller-coaster sales performance in June, the Company's execution matched our financial budgets and we remain on target to achieve our financial goals for the quarter."

During June, Fred's opened one new store, no pharmacies, and closed five stores. For the full year of fiscal 2007, Fred's has opened 13 new stores, eight pharmacies and closed 16 stores and four pharmacies to date and plans to open 30 to 35 new stores, 15 to 25 new pharmacies, and expects to close 20 to 25 stores, netting growth in selling square footage in the range of 1% to 3% for the year.

Fred's Inc. operates 698 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.