MEMPHIS, Tenn. (September 5, 2007) – Fred's Inc. (NASDAQ:FRED) today reported record sales for the for the four-week and seven-month periods ended September 1, 2007.

Fred's total sales for the month increased 4% to $129.0 million from $124.2 million in August 2006. Comparable store sales for the month rose 1.7% on top of a 6.3% increase in August last year.

Total sales for the year-to-date period increased 5% to $995.9 million compared with $948.0 million in the year-earlier period. On a comparable store basis, sales increased 1.4% through the first seven months of fiscal 2007 compared with a 2.6% gain in the year-earlier period.

Commenting on the announcement, Michael J. Hayes, Chief Executive Officer, said, "Although we continued to see a drop-off at the end of the month, August sales were in line with the expectations we outlined last week in our quarterly conference call. We were pleased with the performance of our pets and stationery categories, two of our refresher program departments that have continued to gain momentum to replace sales from product categories that we have exited as part of this initiative. Our men's apparel, domestics, lawn and garden, small appliances, food, and pharmacy departments also performed better in August."

Continuing with its strategy to close underperforming stores, Fred's closed three stores in August, bringing the total number of stores closed so far this year to 19 and four pharmacies. The Company expects to close one to two more stores in the remaining months of fiscal 2007 and plans to open an additional 18 stores this 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.