Exhibit 99.1

Fred's First Quarter 2012 EPS Increase 17%

MEMPHIS, Tenn.--(BUSINESS WIRE)--May 24, 2012--Fred's, Inc. (NASDAQ: FRED) today reported financial results for the first quarter ended April 28, 2012.

For the first quarter ended April 28, 2012, Fred's net income increased to $10.5 million compared with net income of $9.5 million in the year-earlier period, with earnings per diluted share rising 17% to $0.28 from $0.24 in the first quarter last year. Fred's total sales for the first quarter of fiscal 2012 increased 3% to $500.5 million from $484.4 million for the same period last year. Comparable store sales for the quarter declined 0.4% versus an increase of 1.0% for the first quarter last year.

Commenting on the results, Bruce A. Efird, Chief Executive Officer, said, "We are pleased that Fred's delivered solid earnings per diluted share for the first quarter, up 17% from the prior-year period to hit the high end of our expected range for the quarter. Had it not been for the expiration of certain federal tax credits at the end of 2011, which benefited the year-earlier quarter and resulted in a lower tax rate last year, Fred's first quarter earnings per diluted share would have increased 21% on a comparable quarter basis.

"The Company's higher earnings for the first quarter demonstrated the success of strategic and tactical initiatives that have been implemented to drive improved operating performance," Efird continued. "These initiatives produced solid top-line growth in our pharmacy department, in particular, and helped strengthen gross margins in all merchandise areas of our stores. Looking ahead, we will continue with our initiatives to leverage store and pharmacy growth, putting strong emphasis in the general merchandising departments and initiating a series of new programs with a fresh new look. Our goals for 2012 remain firm as we work to drive increased operating margins and earnings per diluted share throughout the year."

Fred's gross profit for the first quarter of 2012 increased 7% to $147.8 million from $137.9 million in the prior-year period. Gross margin for the quarter increased 100 basis points to 29.5% compared with 28.5% in the same quarter last year. The significant increase in gross margin results from improvements throughout most areas of the store. These improvements reflected better management of promotional markdowns in general merchandise and increased vendor rebates and allowances.

Selling, general and administrative expenses for the quarter, including depreciation and amortization, deleveraged 70 basis points to 26.1% of sales from 25.4% of sales in the prior-year quarter. This deleveraging primarily reflected higher pharmacy expenses associated with new acquisitions as well as increased depreciation and amortization, group medical expenses, and legal and professional fees.

Operating income for the first quarter of 2012 increased 13% to $17.1 million or 3.4% of sales compared with $15.1 million or 3.1% of sales in the prior-year period.

Income tax expense during the first quarter increased 17% to $6.5 million or 1.3% of sales compared with $5.5 million or 1.1% of sales in the prior-year period. The effective tax rate for the first quarter of 2012 was 38.4% compared with 36.8% in the year earlier quarter. The increased tax rate resulted from the expiration of federal Work Opportunity Tax Credits (WOTC).

During the first quarter, Fred's opened three new stores and four additional express pharmacy stores as part of its operating plan to open 22 to 28 stores during 2012.

In the second quarter of 2012, the Company expects total sales to increase in the range of 4% to 6%. Comparable store sales are expected to be approximately flat versus a decrease of 0.4% in the second quarter last year. In the second quarter, Fred's anticipates that the largest conversion of brand to generic drugs to date will occur, which will negatively affect comparable store sales. Second quarter 2012 earnings per diluted share are forecasted to increase between 15% and 30% to a range of $0.15 to $0.17 compared with earnings per diluted share of $0.13 in the same period last year. Based on first quarter actual results and this outlook, the Company now expects total earnings per diluted share for 2012 to be in the range of $0.98 to $1.04.

Currently, Fred's, Inc. operates 707 discount general merchandise stores, including 21 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 2012 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 1:00 p.m. Eastern Time and will run until June 24, 2012.

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. These risks and uncertainties include, but are not limited to, those associated with the Company's announced strategic plan, 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; 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.

CONTACT:
Fred's, Inc.
Jerry A. Shore, 901-362-3733, Ext. 2217
Executive Vice President and Chief Financial Officer