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fred’s PHARMACY REPORTS DECEMBER SALES

MEMPHIS, Tenn. (January 5, 2017) – Fred’s Inc. (“Fred’s Pharmacy” or “the Company”) NASDAQ: FRED) today reported sales for the five week fiscal month of December and the 11-month year-to-date period ended December 31, 2016.

Fred’s Pharmacy’s total sales for the month decreased 3.9% to $222.9 million from $232.0 million in December 2015. Comparable store sales for the month declined 3.4% compared with an increase of 2.4% in the year-earlier period.

Fred’s Pharmacy’s total sales for the year-to-date period decreased 0.8% to $1.978 billion versus $1.994 billion for the same period last year. On a comparable store basis, year-to-date sales declined 2.0% versus an increase of 1.5% for the year-earlier period.

Commenting on the announcement, Michael K. Bloom, Chief Executive Officer, said, “Our Pharmacy department saw a 2% increase in comparable prescription growth in the current month, when adjusted for 90 days’ scripts. The Company also reported positive comparable sales in Health and Beauty along with key holiday categories, which posted strong year-over-year growth. However, this wasn’t enough to completely overcome headwinds related to the impact of reduced SNAP benefits, competitive promotional activity and unusually warm weather, which had a negative influence on seasonal categories. Looking more broadly at our business, we believe the key marketing and merchandising initiatives we have implemented will drive future sales, traffic and profits, and represent a solid strategic response to the near-term challenges we are currently experiencing. Between the launch of Category Management University, our robust analytics tools that allow us to better track consumer behavior, and numerous other strategies aimed at increasing sales, we remain confident in Fred’s long-term prospects.” read more

fred’s PHARMACY AGREES TO ACQUIRE 865 RITE AID STORES

Purchase Would Create Third-Largest U.S. Drug Store Chain and Support Healthcare Growth Strategy

MEMPHIS, Tenn. (December 20, 2016) – Fred’s Inc. (“Fred’s Pharmacy” or “the Company”) (NASDAQ: FRED) today announced that the Company has signed an agreement with Walgreens Boots Alliance, Inc. (NASDAQ: WBA) and Rite Aid Corporation (NYSE: RAD) to purchase 865 stores and certain assets related to store operations located across the eastern and western United States for $950 million in cash. Closing of the transaction is expected to take several months after Walgreens Boots Alliance’s proposed acquisition of Rite Aid is completed and is subject to approval by the Federal Trade Commission as well as customary regulatory approvals and closing conditions. Shareholder approval is not required. The transaction, if approved, is targeted to close during the first half of 2017 and will position Fred’s Pharmacy as the third-largest drugstore chain in the United States and create a new national competitor. In connection with this transaction, the Company has received financing commitments to fund the purchase price, transaction-related costs, ongoing business operations and anticipated capital investments.

Fred’s Pharmacy Chief Executive Officer Michael K. Bloom, commented, “This will be a transformative event for Fred’s Pharmacy that will accelerate our healthcare growth strategy through our acquisition of 865 new stores located in highly attractive markets. We believe that this transaction will also create tremendous opportunities for both our new and existing front of store and pharmacy team members. We look forward to realizing the considerable benefits this transaction will bring to our customers, patients, payors, supplier partners, team members and shareholders.”

Bloom continued, “We have been working for several months on integration plans to ensure a seamless transition for Rite Aid customers, patients, team members and supplier partners by leveraging our world-class senior leadership team’s significant expertise in managing major healthcare acquisitions and integrations. We assembled this highly experienced team in 2015, implemented upgrades to our infrastructure in 2016, and now, in 2017, we look forward to the continued optimization of our business, fueled by today’s milestone announcement. We believe the purchase of these stores will not only complement recent investments in our team members, processes, and technological infrastructure, but also positively impact our business and maximize shareholder value.”

In aggregate, the 865 stores are generally representative of Rite Aid’s pre-divesture store performance with respect to both sales and EBITDA. Fred’s Pharmacy expects that the acquired stores would be accretive to earnings and generate substantial cash flow.

Fred’s Pharmacy will continue to employ, contingent on consummation of the transaction, store and certain field and regional team members related to the operations of the acquired stores. Upon completion of the acquisition, the Company will operate the acquired stores and will retain the Rite Aid banner through a 24-month transition.

A.T. Kearney served as a strategic advisor to the CEO and Board of Directors and provided financial and operational diligence related to the transaction. BofA Merrill Lynch and Regions Bank have committed to provide financing to Fred’s Pharmacy. Peter J. Solomon Company, LLC provided a fairness opinion to the Board of Directors of the Company in connection with the transaction.  read more

fred’s ANNOUNCES THIRD QUARTER 2016 RESULTS, NOVEMBER SALES

MEMPHIS, Tenn. (December 8, 2016) – Fred’s, Inc. (or “the Company”) (NASDAQ: FRED) today reported financial results for the third quarter and nine months ended October 29, 2016.

For the third quarter ended October 29, 2016, net loss totaled $38.4 million or $1.05 per share, compared with net income of $1.4 million or $0.04 per share for the third quarter of last year. The Company recorded charges totaling $38.0 million, or $0.78 per share after tax during the quarter, primarily related to inventory write-downs, as well as the closing of 40 stores scheduled to occur in the first half of 2017. These charges include:
• $13.0 million on a pretax basis or $0.23 per share after tax for the write down of unproductive inventory;
• $7.4 million on a pretax basis or $0.13 per share after tax for fixed asset impairments and inventory write-downs related to the closing of 40 underperforming stores;
• $3.1 million on a pretax basis or $0.05 per share after tax for fixed asset impairments related to the upcoming relocation of the corporate headquarters;
• $2.2 million on a pretax basis or $0.04 per share after tax for consulting fees incurred in connection with the development and implementation of the Company’s growth strategy;
• $1.3 million on a pretax basis or $0.03 per share after tax for other non-recurring items; and
• $11.0 million or $0.30 per share after tax for a valuation allowance against the Company’s deferred tax asset resulting from the pretax loss created primarily by the above-mentioned charges in the third quarter.

Net income for the third quarter of 2015 included expenses totaling approximately $2.8 million on a pretax basis or $0.05 per share after tax for estimated claims against the Company related to a previously reported data security breach and $1.6 million on a pretax basis or $0.03 per share after tax for consulting fees and other non-recurring charges.

For the first nine months of 2016, Fred’s net loss totaled $44.1 million or ($1.20) per share compared with a net loss of $3.5 million or ($0.09) per share for the same period last year. In addition to charges incurred in the third quarter, Fred’s net loss for 2016 included expenses related to prior periods of $0.4 million on a pretax basis or $0.01 per share after tax.

Net sales for the third quarter were $516.6 million, down 4.5% from $541.0 million in the same period of last year, while total sales for the first nine months of 2016 were flat at $1.596 billion compared with the prior-year period. Comparable store sales for the third quarter declined 3.8% versus an increase of 2.7% in the third quarter last year, while comparable store sales for the first nine months of 2016 decreased 1.7% versus an increase of 1.5% in the prior-year period.

The Company also reported sales for the four week fiscal month ended November 26, 2016. Fred’s total sales for the month decreased 3.6% to $159.7 million from $165.7 million in November 2015. Comparable store sales for November declined 2.9% versus an increase of 1.7% in the year-earlier month. The decline in November 2016 comparable store sales reflected continued challenges in both front store and pharmacy sales.

Michael Bloom, Chief Executive Officer, commented, “We continue to address and improve several key areas of our business, including a heightened focus on positioning Fred’s as a leading healthcare-focused company. These ongoing initiatives are designed to strengthen all aspects of our operations as we seek to create a more dynamic platform to grow our business while maximizing returns on invested capital and, in turn, shareholder value. We look forward to providing additional updates in the months and quarters ahead.”

Fred’s gross profit for the third quarter of 2016 decreased to $111.2 million from $142.3 million in the prior-year period, primarily explained by inventory impairment charges, pharmacy reimbursement pressures, and the decline in year-over-year sales. Gross margin for the quarter decreased 480 basis points to 21.5% from 26.3% in the same quarter last year. Gross profit for the first nine months of 2016 decreased 7.4% to $380.7 million from $411.3 million in the prior-year period. Gross margin for the first nine months of 2016 deleveraged 190 basis points to 23.9% from 25.8% in the prior-year period. Fred’s recorded LIFO adjustments of $2.1 million in the third quarter of 2016 compared with $0.03 million in the same quarter last year. In the first nine months of 2016, Fred’s recorded LIFO adjustments of $3.2 million compared with $3.6 million last year.

Selling, general and administrative expenses for the quarter, including depreciation and amortization, increased 410 basis points to 30.0% of sales from 25.9% of sales in the prior-year quarter. The deleveraging in expenses for the third quarter was primarily caused by a decrease in sales volume in 2016 combined with fixed asset impairment charges and consulting fees resulting from the Company’s initiatives. Selling, general and administrative expenses for the first nine months of 2016, including depreciation and amortization, increased or deleveraged 110 basis points to 27.2% of sales from 26.1% of sales in the prior-year period, driven primarily by impairment charges recorded in the third quarter of 2016.

For the third quarter of 2016, operating loss, which is equivalent to earnings before interest and taxes, or EBIT, a non-GAAP financial measure, decreased to a loss of $44.1 million or (8.5%) of sales compared with operating income of $2.4 million or 0.4% of sales in the prior-year period. For the first nine months of 2016, operating income decreased to a loss of $52.5 million or (3.3%) of sales compared with a loss of $5.3 million or (0.3%) of sales.

For the third quarter of 2016, EBITDA a non-GAAP financial measure that further excludes depreciation and amortization from EBIT, declined to a loss of $32.1 million or (6.2%) of sales compared with EBITDA of $13.8 million or 2.5% of sales in the year-earlier quarter. EBITDA for the first nine months decreased to a loss of $17.2 million or (1.1%) of sales in 2016 compared with EBITDA of $28.5 million or 1.8% of sales last year.

Fred’s, Inc. and subsidiaries operate 647 discount general merchandise stores and three specialty pharmacy-only locations in 15 states in the southeastern United States. Included in the store count are 18 franchised locations. Also, there are 370 full service pharmacy departments located within Fred’s stores, including four franchised locations. For more information about the Company, visit Fred’s website at www.fredsinc.com.

A public, listen-only simulcast and replay of Fred’s third quarter 2016 conference call may be accessed at the Company’s web site. The simulcast will begin at approximately 4:30 p.m. Eastern Time today; a replay of the call will be available beginning at approximately 7:30 p.m. Eastern Time and will continue until January 8, 2016.

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. A reader can identify forward-looking statements because they are not limited to historical facts or they use such words as “outlook,” “guidance,” “may,” “should,” “could,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “forecast,” “goal,” “intend,” “committed,” “continue,” or “will likely result” and similar expressions that concern the Company’s strategy, plans, intentions or beliefs about future occurrences or results. These risks and uncertainties include, but are not limited to, those associated with the Company’s announced strategic plan, the ultimate terms of the reworked pharmacy distribution agreement, lease buyouts and the underlying assumptions and projections upon which they are based, as well as risks that intended results may not be achieved or may not occur as quickly as expected; the success of announced acquisition activities and future growth trends in businesses acquired; 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; cyber-security threats; costs and delays in acquiring or developing new store sites; and the factors listed under “Risk Factors” in the Company’s most recent Annual Report on Form 10-K and any subsequent quarterly filings on Form 10-Q filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date made. 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. read more

fred’s RESCHEDULES ITS THIRD QUARTER RELEASE TO DECEMBER 8, 2016, AND POSTPONES ANALYST DAY

MEMPHIS, Tenn. (November 30, 2016) – Fred’s, Inc. (or “the Company”) (NASDAQ: FRED) today announced that it is rescheduling the release of its third quarter results and November sales, which was set to occur Friday, December 2, 2016, to Thursday, December 8, 2016. The Company also will postpone its analyst day presentation, also originally set for December 2, until a future date.

The Company’s results for the third quarter ended October 29, 2016, will be released after the market close on Thursday, December 8, 2016. A live broadcast of Fred’s conference call will begin at 4:30 p.m. Eastern Time that afternoon, and an online Web simulcast of the call will be provided. An online replay will be available approximately two hours following the conclusion of the live broadcast and will continue through January 8, 2017. A link to these events can be found at www.fredsinc.com.  read more

fred’s DECLARES QUARTERLY CASH DIVIDEND OF $0.06 PER SHARE

MEMPHIS, Tenn. (November 21, 2016) – Fred’s, Inc. (NASDAQ: FRED) today announced that its Board of Directors has declared a quarterly cash dividend of $0.06 per share. The dividend is payable on December 15, 2016, to shareholders of record as of December 1, 2016. read more

fred’s REPORTS OCTOBER SALES AND SETS DATE TO RELEASE NOVEMBER SALES AND THIRD QUARTER FINANCIAL RESULTS

MEMPHIS, Tenn. (November 3, 2016) – Fred’s Inc. (NASDAQ: FRED) today reported sales for the four week fiscal month of October, third quarter and nine-month year-to-date period ended on October 29, 2016.

Fred’s total sales for the month decreased 4.2% to $157.3 million from $164.2 million in October 2015. Comparable store sales for the month declined 3.4% compared with an increase of 2.3% in the year-earlier period.

Total sales for the third quarter of 2016 were $516.7 million, down 4.5% from $541.0 million in the same period last year. Comparable store sales for the quarter declined 3.8% compared with an increase of 2.7% in the third quarter of 2015.

Fred’s total sales for the year-to-date period were flat at $1.596 billion versus $1.596 billion for the same period last year. On a comparable store basis, year-to-date sales declined 1.7% versus an increase of 1.5% for the year-earlier period.

Commenting on the announcement, Michael K. Bloom, Chief Executive Officer, said, “While we continue to make broad progress in addressing the issues that have affected our sales over the past several months, these improvements were obscured primarily by four discrete factors in October that prevented us from hitting our sales expectations for the month. In the front store, we encountered unexpected challenges in our transition to a third-party distributor for several key categories. October sales also were affected by the calendar shift for Halloween, as we cautioned last month, which pushed the holiday into the fiscal month of November this year versus October last year. Significant reductions in SNAP payments and warmer-than-expected weather during the month also contributed to October’s sales decline. Retail pharmacy sales continued to be pressured by the ongoing shift to 90-day prescriptions, as expected, but our specialty pharmacy sales, while still running below last year’s level due to an industry-wide slowdown in Hepatitis C drugs, gained further ground in October with month-over-month growth. Outside of these headwinds, which we consider to be transitory, as well as the tough comparisons we have faced against last year’s sales, we remain confident in the strategic path for Fred’s. With the key initiatives we have in place to drive future growth and improve profitability, we continue to make bold strategic shifts in our business.”

Due in part to current revenue trends and the evolving nature of the Company’s business, including the optimization of its store fleet and other initiatives that management plans to discuss in greater detail at analyst day next month, Fred’s is suspending its previously issued guidance for the second half of 2016, which should no longer be relied upon, as it does not reflect management’s vision for the future of Fred’s. The suspension of guidance does not impact management’s continued confidence in the Company’s ability to deliver improved shareholder value via an enhanced operating platform positioned for growth. Management looks forward to providing additional details next month during analyst day presentations.

Separately, Fred’s also announced that, in conjunction with its analyst day meeting next month in New York City, the Company will release its November sales together with financial results for the third quarter ended October 29, 2016, before the market opens on Friday, December 2, 2016. During the analyst day presentation, which begins at 8:30 a.m. EST that day and will stream live over the web, management will comment on Fred’s operations and performance for the quarter, among other topics. A link to the event will be available at www.fredsinc.com under investor relations.

Fred’s analyst day is expected to conclude at 12:00 noon EST. An online replay will be available approximately two hours following the conclusion of the live broadcast and will continue through January 2, 2017.

Fred’s, Inc. and subsidiaries operate 648 discount general merchandise stores and three specialty pharmacy-only locations in 15 states in the southeastern United States. Included in the store count are 18 franchised locations. Also, there are 370 full service pharmacy departments located within Fred’s stores, including four franchised locations. 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. A reader can identify forward-looking statements because they are not limited to historical facts or they use such words as “outlook,” “guidance,” “may,” “should,” “could,” “believe,” “anticipate,” “plan,” “expect,” “estimate,” “forecast,” “goal,” “intend,” “committed,” “continue,” or “will likely result” and similar expressions that concern the Company’s strategy, plans, intentions or beliefs about future occurrences or results. These risks and uncertainties include, but are not limited to, those associated with the Company’s announced strategic plan, the ultimate terms of the reworked pharmacy distribution agreement, lease buyouts and the underlying assumptions and projections upon which they are based, as well as risks that intended results may not be achieved or may not occur as quickly as expected; the success of announced acquisition activities and future growth trends in businesses acquired; 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; cyber-security threats; costs and delays in acquiring or developing new store sites; and the factors listed under “Risk Factors” in the Company’s most recent Annual Report on Form 10-K and any subsequent quarterly filings on Form 10-Q filed with the Securities and Exchange Commission. Forward-looking statements speak only as of the date made. 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. read more

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