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CONTACT: FRED'S REPORTS FIRST QUARTER 2007 RESULTS MEMPHIS, Tenn. (May 31, 2007) – Fred's, Inc. (NASDAQ: FRED) today reported financial results for the first quarter ended May 5, 2007. Net income for the first quarter of fiscal 2007 increased 2% to $7.4 million or $0.19 per diluted share compared with net income of $7.3 million or $0.18 per diluted share in the year-earlier quarter. As reported earlier, total sales for the first quarter rose 6% to $442.3 million compared with $416.9 million in the same period last year. On a comparable store basis, sales increased 1.9% on top of the 2.3% gain reported in the same period last year. Commenting on the results, Michael J. Hayes, Chief Executive Officer, said, "We are pleased to report that earnings for the first quarter tracked within the range we had expected. These results were especially gratifying considering that the quarter was an active period for Fred's in terms of our store upgrade and merchandising initiatives. By the end of April, this refresher program had commenced in over 20% of our stores. These efforts are significant in scope and eventually will involve over 500 of our stores to enhance the look and expand key departments for our customers. While there are negative short-term sales impacts, we have seen positive performance from the completed upgrades and are confident as to the long-term value of the program." Hayes noted that the entire refresher program is expected to be completed by early October. During the quarter, Fred's opened 10 stores, closed 10 stores, opened six pharmacies, and closed two pharmacies. In 2007, the Company plans to open 35 to 40 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 gross profit for the first
quarter of 2007 was $127.0 million compared with $119.8 million in the same
period last year, representing an increase of 6% for the period. Gross
margin for the quarter was 28.7% of sales, unchanged from the year-earlier
period. Fred's Inc. operates 701 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. A public, listen-only simulcast and replay of Fred's first quarter conference call may be accessed at the Company's web site or at www.earnings.com. The simulcast will begin at approximately 10:00 a.m. Eastern Time today; a replay of the call will be available beginning at approximately noon Eastern Time and will run until July 1, 2007. 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. FRED'S, INC. FRED'S INC.
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