Fred's, Inc.
4300 New Getwell Road
Memphis, Tennessee  38118
Contact:  Richard B. Witaszak  (901) 365-8880

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FOR IMMEDIATE RELEASE


               FRED'S ADOPTS PREFERRED SHARE PURCHASE RIGHTS PLAN
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                           DECLARES DIVIDEND OF RIGHTS


     MEMPHIS,  Tennessee  (October 12, 1998) - Fred's,  Inc.  (Nasdaq/NM:  FRED)
today  announced  that its Board of Directors has adopted a  Shareholder  Rights
Plan and  declared a dividend  of one  Preferred  Share  Purchase  Right on each
outstanding share of Fred's,  Inc. common stock. The Plan is intended to protect
and potentially  enhance  shareholder value, as well as assist the Fred's,  Inc.
Board in realizing the Company's strategic objectives.

     The non-taxable  dividend  distribution is payable on October 12, 1998. The
rights will expire on October 12,  2008. A summary of the rights will be sent to
shareholders.

     "The Plan is  similar  to plans  adopted  by many  other  companies,"  said
Michael Hayes, President and Chief Executive Officer of Fred's, Inc. "The Rights
are designed to assure that all  shareholders of Fred's,  Inc.  receive fair and
equal  treatment  in the event of any  proposed  takeover  of the Company and to
guard against partial tender offers, open market accumulations and other abusive
tactics to gain control of the Company which might provide  inadequate  value to
shareholders.  We are not aware of any efforts to acquire Fred's, Inc. This Plan
is only a precaution taken to protect the rights of our shareholders."

     The  Rights  will be  exercisable  only if a person  or group  acquires  15
percent or more of the Company's  common stock or announces a tender offer,  the
consummation  of which  would  result  in  ownership  by a person or group of 15
percent  or more of the  Company's  common  stock.  The  Plan  has the  standard
"flip-in", "flip-over",  redemption and exchange features commonly found in such
plans.

     Fred's, Inc. operates 310 discount general merchandise stores, including 30
franchised  Fred's  stores,  in  the  southeastern   Untied  States.   For  more
information  about  the  Company,  visit  Fred's  website  on  the  Internet  at
www.fredsinc.com.