Fred’s Pharmacy Reports May Sales

Executing our transformation strategy

Comparable store sales increased 0.8%

MEMPHIS, Tenn.--()--Fred’s, Inc. (“Fred’s Pharmacy” or the “Company”) (NASDAQ:FRED) today reported sales for the four-week fiscal month of May, which ended May 27, 2017.

Fred’s total sales for the month decreased 3.1% year-over-year to $160.1 million from $165.2 million in May 2016. The decrease in sales is related to the closure of 39 underperforming stores in the first quarter. Total comparable store sales for the month increased 0.8% compared with a 0.4% decrease in comparable sales in the prior year period. Comparable store sales for May included a negative 1.0% impact as a result of the sale of low productive discontinued inventory versus May of last year.

Commenting on the announcement, Michael K. Bloom, Chief Executive Officer, said, “This month we continued to deliver on our 2017 goals and execute our healthcare transformation. We are pleased with our performance in the month, with total comparable store sales for May increasing 0.8% compared with the prior year. We are seeing substantial momentum in our Retail and Specialty pharmacy businesses, creating opportunities for growth throughout the Company. In Retail Pharmacy, adjusted script comps are continuing to trend positively, while in the Specialty Pharmacy business we are consistently experiencing significant sales growth. We are confident in the ability of our leadership team and the entire Fred’s Pharmacy team to drive further operational improvement as we continue to build on the foundation we’ve laid for future growth and success.”

About Fred's Pharmacy

Tracing its history back to an original store in Coldwater, Mississippi, opened in 1947, today Fred’s Pharmacy is headquartered in Memphis, Tennessee, and operates 601 pharmacy and general merchandise stores, including 14 franchised Fred’s Pharmacy locations, and three specialty pharmacy-only locations. With a unique store format and strategy that combines the best elements of a healthcare-focused drug store with a value-focused retailer, Fred’s Pharmacy stores offer more than 12,000 frequently purchased items that address the healthcare and everyday needs of its customers and patients. This includes nationally recognized brands, proprietary Fred’s Pharmacy label products, and a full range of value-priced selections. The Company has two distribution centers, one in Memphis, Tennessee, and Dublin, Georgia.

On December 20, 2016, the Company announced that it signed an agreement with Walgreens Boots Alliance, Inc. and Rite Aid to purchase 865 stores for $950 million in cash. Fred’s Pharmacy is working collaboratively with Walgreens Boots Alliance, Rite Aid and the Federal Trade Commission (“FTC”) to help obtain the FTC’s approval of Walgreens Boots Alliance’s pending acquisition of Rite Aid and the divestiture of certain Rite Aid assets to Fred’s Pharmacy. Fred’s Pharmacy remains committed to purchasing additional assets, including up to 1,200 Rite Aid stores, to the extent necessary to obtain the FTC’s approval of the transaction. Completion of the transaction is subject to approval by the FTC, as well as other customary regulatory approvals and closing conditions.

The proposed acquisition of the stores, which are based in highly attractive markets, is a transformative event that will add substantial scale to the Company and transform Fred’s Pharmacy, the largest regional pharmacy player, into an even stronger competitor and the third-largest drugstore chain in the nation. The transaction will accelerate the Company’s healthcare growth strategy, generating considerable benefits for our customers, patients, payors, supplier partners, team members and shareholders.

For more information about the Company, visit Fred’s website at www.fredsinc.com.

Forward-Looking Statements

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. The words "outlook", "guidance", "may", "should", "could", "believe", "anticipate", "project", "plan", "expect", "estimate", "objective", "forecast", "goal", "intend", "will likely result", or "will continue" and similar expressions generally identify forward-looking statements. All forward-looking statements are inherently uncertain, and concern matters that involve risks and other factors that may cause the actual performance of the Company to differ materially from the performance expressed or implied by these statements. Therefore, forward-looking statements should be evaluated in the context of these uncertainties and risks, including but not limited to the competitive nature of the industries in which we operate; the implementation of our strategic plan, and its impact on our sales, costs and operations; utilizing our existing and new stores and increasing our pharmacy department presence in new and existing stores; our reliance on a single supplier of pharmaceutical products; our pharmaceutical drug pricing; reimbursement rates and the terms of our agreements with pharmacy benefit management companies; our private brands; the seasonality of our business and the impact of adverse weather conditions; operational difficulties; merchandise supply and pricing; consumer demand and product mix; delayed openings and operating new stores and distribution facilities; our employees; risks relating to payment processing; our computer system, and the processes supported by our information technology infrastructure; our ability to protect the person information of our customers and employees; cyber-attacks; changes in governmental regulations; the outcome of legal proceedings, including claims of product liability; insurance costs; tax assessments and unclaimed property audits; current economic conditions; changes in third-party reimbursements; the terms of our existing and future indebtedness; our acquisitions and the ability to effectively integrate businesses that we acquire, including risks related to the possibility that transactions may not close, including because one or more closing conditions to such transactions, including certain regulatory approvals, may not be satisfied or waived, on a timely basis or otherwise, including that a governmental entity may prohibit, delay or refuse to grant approval for the consummation of such transactions, or may require conditions, limitations or restrictions in connection with such approvals; the risk that the businesses and acquired stores, as applicable, will not be integrated successfully; the risk of litigation and/or regulatory actions related to such proposed transaction; our ability to pay dividends; and the factors listed under "Risk Factors" in the Company's most recent Annual Report on Form 10-K and any subsequent filings with the Securities and Exchange Commission.

Forward-looking statements speak only as of the date made. Consequently, all forward-looking statements are qualified by this cautionary statement. Readers should not place undue reliance on any forward-looking statements. 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.

Contacts

Fred's Pharmacy
Rick Hans, 901-238-2232
Executive Vice President, Chief Financial Officer and Secretary
or
Joele Frank , Wilkinson Brimmer Katcher
Ed Trissel / Steve Frankel / Dan Moore, 212-355-4449

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Fred’s Pharmacy Reports May Sales

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