Fred's Pharmacy Reports January Sales

Fred's Inc. ("Fred's Pharmacy" or "the Company") (NASDAQ: FRED) today reported sales for the four-week fiscal month of January 2017, fourth quarter 2016 and fiscal year 2016 ended January 28, 2017.

• January 2017: Total sales for the month decreased 5.6% year-over-year to $148.1 million from $156.9 million in January 2016. Comparable store sales for the month declined 4.8% versus an increase of 0.7% in the year-earlier period.
• Fourth Quarter 2016: Total sales for the fourth quarter of 2016 decreased 4.3% year-over-year to $530.7 million from $554.6 million in the fourth quarter of 2015. On a comparable store basis, fourth quarter sales decreased 3.6% versus an increase of 1.7% in the year-earlier period.
• Fiscal Year 2016: Total sales for fiscal 2016 decreased 1.1% year-over-year to $2.126 billion from $2.151 billion in fiscal year 2015. On a comparable store basis, fiscal 2016 declined 2.2% versus an increase of 1.5% for the year-earlier period.

Commenting on the announcement, Michael K. Bloom, Chief Executive Officer, said, "We are pleased to report that comparable sales for our specialty pharmacy business trended positive in January 2017, reflecting the success of initiatives we have implemented over the past year to offset the industry-wide slowdown in Hepatitis C drugs and diversify our specialty offering. The progress we made in specialty pharmacy was offset in retail pharmacy by the effects of winter weather events, a slow cold and flu season, and continued reimbursement pressure. In our front store, we experienced softer sales related to continuing challenges that we have discussed previously, such as issues related to transitioning several key categories to a third-party distributor, the impact of reduced SNAP benefits, unseasonably warm weather, and intense competitive conditions. Additionally, we encountered a new, but transitory challenge in January: the delay of refunds for taxpayers receiving an earned income tax credit or an additional child tax credit, which we believe disproportionately affected our customers and, as a result, discretionary sales throughout our store. However, these refunds should be released on February 15, which we anticipate will have a favorable impact on February sales. Outside of competitive challenges, we estimate the impact of other front store issues reduced January comparable sales by approximately 2.4%.

"We continue to take a long-term view of our business and the opportunities ahead as a significant provider of healthcare services and value merchandise in the markets that we serve," Bloom added. "Our confidence in this new vision remains firm, as does our enthusiasm for the potential we see to grow sales, traffic and profits, and in turn, drive higher returns for our shareholders."

Fred's Pharmacy and subsidiaries currently operate 644 discount general merchandise stores and three specialty pharmacy-only locations in 15 states in the southeastern United States. Included in the store count are 16 franchised locations. Also, there are 362 full service pharmacy departments located within Fred's stores, including three 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.

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