FORM 10-Q


                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549


[ X ]  QUARTERLY  REPORT  PURSUANT  TO  SECTION  13 OR 15(d)  OF THE  SECURITIES
       EXCHANGE ACT OF 1934.

                 For the quarterly period ended August 2, 2003.

                                       OR

[   ]  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE
       SECURITIES EXCHANGE ACT OF 1934.

For the transition period from                 to                .
                               ---------------    ---------------


                        Commission file number 001-14565


                                  FRED'S, INC.
             (Exact name of registrant as specified in its charter)


              Tennessee                            62-0634010
    (State or other jurisdiction of             (I.R.S. Employer
     incorporation or organization)             Identification No.)

4300 New Getwell Rd., Memphis, Tennessee              38118
(Address of principal executive offices)            (zip code)

                                 (901) 365-8880
              (Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days.
Yes    X   .             No             .
    -------                 ------------

Indicate by check mark whether the registrant is an accelerated filer.
Yes      X        No
    -----------      -----------

The  registrant  had  39,101,108  shares of Class A voting,  no par value common
stock outstanding as of September 5, 2003.


                                       1

                                  FRED'S, INC.
                                  ------------

                                      INDEX
                                      -----

                                                                        Page No.
- --------------------------------------------------------------------------------

Part I - Financial Information
- ------------------------------

  Item 1 - Financial Statements (unaudited):

    Consolidated Balance Sheets as of
     August 2, 2003 and February 1, 2003                                      3

    Consolidated Statements of Income
     for the Thirteen Weeks Ended August 2, 2003
     and August 3, 2002 and the Twenty-Six Weeks ended
     August 2, 2003 and August 3, 2002                                        4

    Consolidated Statements of Cash Flows
     for the Twenty-six Weeks Ended August 2, 2003
     and August 3, 2002                                                       5

    Notes to Consolidated Financial Statements                                6

  Item 2 - Management's Discussion and
                Analysis of Financial Condition and
                Results of Operations                                    8 - 11

  Item 3 - Quantitative and Qualitative Disclosures
                  about Market Risk                                          11

  Item 4 - Controls and Procedures                                           11

Part II - Other Information                                                  12
- ---------------------------

Signatures                                                                   13
- ----------

                                       2


                                  FRED'S, INC.
                           CONSOLIDATED BALANCE SHEETS
                                   (unaudited)

                   (in thousands, except for number of shares)

                                                                                          

                                                                             August 2,          February 1,
                                                                               2003                2003
                                                                               ----                ----
ASSETS:
- -------
Current assets:
      Cash and cash equivalents                                               $2,202              $8,209
      Receivables, less allowance for doubtful
       accounts of $975 ($975 at February 1, 2003)                            15,967              18,400
      Inventories                                                            218,770             193,506
      Other current assets                                                     6,106               7,775
                                                                            --------            --------
           Total current assets                                              243,045             227,890
      Property and equipment, at depreciated cost                            124,751             110,794
      Equipment under capital leases, less accumulated
       amortization of $2,881 ($2,542 at February 1,2003)                      2,086               2,425
      Other noncurrent assets                                                  4,345               4,739
                                                                            --------            --------
           Total assets                                                     $374,227            $345,848
                                                                            ========            ========

LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Current liabilities:
      Accounts payable                                                       $54,327             $58,489
      Current portion of indebtedness                                             36                 177
      Current portion of capital lease obligations                               705                 728
      Accrued liabilities                                                     17,839              19,484
      Current deferred tax liability                                          11,273              10,559
                                                                            --------            --------
          Total current liabilities                                           84,180              89,437
                                                                            --------            --------

Long term portion of indebtedness                                              8,489                 121
Capital lease obligations                                                      2,031               2,389
Deferred tax liability                                                         7,328                 676
Other noncurrent liabilities                                                   2,655               2,455
                                                                            --------            --------
           Total liabilities                                                 104,683              95,078
                                                                            --------            --------

Shareholders' equity:
- ---------------------
      Preferred stock, nonvoting, no par value,
        10,000,000 shares authorized, none outstanding                         ---                 ---
      Preferred stock, Series A junior participating
         nonvoting, no par value, 224,594 shares
         authorized, none outstanding                                          ---                 ---
      Common stock, Class A voting, no par value,
         60,000,000 shares authorized 38,991,714
         shares issued and outstanding
         (38,509,888 shares at February 1, 2003)                             125,277             117,209
      Common stock, Class B nonvoting, no par value,
         11,500,000 shares authorized, none outstanding                        ---                 ---
      Retained earnings                                                      144,267             133,589
      Deferred compensation on restricted
         stock incentive plan                                                  ---                   (28)
                                                                            --------            --------
           Total shareholders' equity                                        269,544             250,770
                                                                            --------            --------
      Total liabilities and shareholders' equity                            $374,227            $345,848
                                                                            ========            ========



          See accompanying notes to consolidated financial statements.

                                       3


                                  FRED'S, INC.
                        CONSOLIDATED STATEMENTS OF INCOME
                                   (unaudited)
                    (in thousands, except per share amounts)


                                                                      

                                        Thirteen Weeks Ended      Twenty-Six Weeks Ended
                                       ----------------------      ----------------------
                                        August 2,     August 3,     August 2,    August 3,
                                          2003           2002         2003          2002
                                        ----------------------      ----------------------
Net sales                              $302,270      $256,470        $612,959     $514,897
Cost of goods sold                      217,326       186,832         440,067      375,834
                                        -------       -------         -------      -------
  Gross profit                           84,944        69,638         172,892      139,063
Selling, general and
 administrative expenses                 78,259        63,990         154,230      124,002
                                        -------       -------         -------      -------
  Operating income                        6,685         5,648          18,662       15,061
Interest expense(income),net                100             7             197          (67)
                                        -------       -------         -------      -------
  Income before income taxes              6,585         5,641          18,465       15,128
Provision for income taxes                2,200         1,974           6,223        5,186
                                        -------       -------         -------      -------
Net income                             $  4,385      $  3,667        $ 12,242     $  9,942
                                       ========      ========        ========     ========
Net income per share *
    Basic                              $    .11      $    .10        $    .32     $    .26
                                       ========      ========        ========     ========
    Diluted                            $    .11      $    .09        $    .31     $    .25
                                       ========      ========        ========     ========
Weighted average shares outstanding *
    Basic                                38,695        38,229          38,569       38,133
                                       ========      ========        ========     ========
    Diluted                              39,510        39,167          39,328       39,164
                                       ========      ========        ========     ========
    Dividends per share                $    .02      $    .02        $    .02     $    .02
                                       ========      ========        ========     ========




*    All  share  and per  share  amounts  have  been  adjusted  to  reflect  the
     distribution of a three-for-two stock split on July 1, 2003.



          See accompanying notes to consolidated financial statements.

                                       4


                                  FRED'S, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOWS
                                   (unaudited)
                                 (in thousands)

                                                                                         

                                                                                Twenty-six Weeks Ended
                                                                               August 2,       August 3,
                                                                                  2003           2002
                                                                                  ----           ----
Cash flows from operating activities:
    Net income                                                                  $12,242           $9,942
    Adjustments to reconcile net income
    to net cash flows from operating activities:
      Depreciation and amortization                                              12,124           10,107
      Provision for uncollectible receivables                                      -                 (42)
      LIFO reserve                                                                  670              600
      Deferred income taxes                                                       7,366              756
      Amortization of deferred compensation on
        restricted stock incentive plan                                              28               23
    Tax benefit upon exercise of stock options                                    1,066            1,305
    (Increase)decrease in assets:
           Receivables                                                            2,433              366
         Inventories                                                            (25,934)         (20,043)
           Other assets                                                          (1,287)          (1,034)
    Increase (decrease) in liabilities:
      Accounts payable and accrued liabilities                                   (5,807)             158
      Income taxes payable                                                        2,962             (459)
      Other noncurrent liabilities                                                  200              200
                                                                                --------         --------
      Net cash provided by operating activities                                   6,063            1,879
                                                                                --------         --------

Cash flows from investing activities:
    Capital expenditures                                                        (24,879)         (19,431)
    Asset acquisition, net of cash acquired
     (primarily intangibles)                                                       (468)          (1,110)
                                                                                --------         --------
Net cash used in investing activities                                           (25,347)         (20,541)
                                                                                --------         --------

Cash flows from financing activities:
    Reduction of indebtedness and capital lease
      obligations                                                                  (551)            (479)
   Proceeds from revolving line of credit,
      net of payments                                                             8,397            2,564
    Proceeds from exercise of options                                             1,531            1,277
   Proceeds from sale of additional shares                                        5,464            3,537
    Cash dividends paid                                                          (1,564)          (1,550)
                                                                                --------         --------
  Net cash provided by financing activities                                      13,277            5,349
                                                                                --------         --------
    Decrease in cash and cash equivalents                                        (6,007)         (13,313)
    Beginning of period cash and cash equivalents                                 8,209           15,906
                                                                                --------         --------
    End of period cash and cash equivalents                                      $2,202           $2,593
                                                                                ========         ========

Supplemental disclosures of cash flow information:
    Interest (received) paid                                                       $192             ($49)
                                                                                ========         ========
    Income taxes paid                                                                             $6,300
                                                                                ========         ========
   Non cash investing and financing activities:
       Assets acquired through capital lease obligations                           $---           $1,330
                                                                                ========         ========



          See accompanying notes to consolidated financial statements.

                                       5


                                  FRED'S, INC.
                                  ------------
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                   ------------------------------------------
                  (amounts in thousands, except per share data)

- -------------------------------------------------------------------------------
NOTE 1: BASIS OF PRESENTATION

- -------------------------------------------------------------------------------

     Fred's,   Inc.  ("We",   "Our"  or  "Us")  operates  494  discount  general
merchandise  stores,  including 26 franchised  Fred's stores, in fourteen states
mainly in the southeastern  United States.  Two hundred and thirty of the stores
have full service pharmacies.

     The  accompanying  unaudited  consolidated  financial  statements have been
prepared in accordance  with the  instructions to Form 10-Q and therefore do not
include all information and notes necessary for a fair presentation of financial
position,  results of operations  and cash flows in conformity  with  accounting
principles  generally  accepted in the United States.  The statements do reflect
all adjustments (consisting of only normal recurring accruals) which are, in the
opinion of management,  necessary for a fair presentation of financial  position
in  conformity  with  accounting  principles  generally  accepted  in the United
States.  The  statements  should  be read in  conjunction  with the Notes to the
Consolidated  Financial  Statements  for the fiscal year ended  February 1, 2003
incorporated into Our Annual Report on Form 10-K.

     The results of operations  for the  twenty-six  week period ended August 2,
2003 are not  necessarily  indicative of the results to be expected for the full
fiscal year.

     Certain prior quarter amounts have been reclassified to conform to the 2003
presentation.

- -------------------------------------------------------------------------------
NOTE 2:  INVENTORIES

- -------------------------------------------------------------------------------

     Warehouse  inventories  are stated at the lower of cost or market using the
FIFO (first-in, first-out) method. Retail inventories are stated at the lower of
cost or market as determined by the retail  inventory  method.  Under the retail
inventory method ("RIM"), the valuation of inventories at cost and the resulting
gross margin are calculated by applying a calculated cost-to-retail ratio to the
retail value of inventories. The RIM is an averaging method that has been widely
used in the retail industry due to its practicality. Also, it is recognized that
the use of the RIM will result in valuing inventories at lower of cost or market
if  markdowns  are  currently  taken  as a  reduction  of the  retail  value  of
inventories.  Inherent in the RIM calculation are certain significant management
judgments and estimates including, among others, initial markups, markdowns, and
shrinkage,  which significantly impact the ending inventory valuation at cost as
well as resulting gross margin.  These significant  estimates,  coupled with the
fact that the RIM is an averaging  process,  can,  under certain  circumstances,
produce distorted or inaccurate cost figures.  Management  believes that our RIM
provides an inventory  valuation which reasonably  approximates cost and results
in carrying inventory at the lower of cost or market. For pharmacy  inventories,
which  are   $35,882  and  $31,304  at  August  2,  2003  and  August  3,  2002,
respectively,  cost was determined using the LIFO (last-in,  first-out)  method.
The current  cost of  inventories  exceeded the LIFO cost by $6,808 at August 2,
2003 and $5,203 at August 3, 2002.

LIFO pharmacy  inventory  costs can only be determined  annually when  inflation
rates and inventory  levels are finalized;  therefore,  LIFO pharmacy  inventory
costs for  interim  financial  statements  are  estimated  based upon the latest
available published index.

                                       6


- -------------------------------------------------------------------------------
NOTE 3:  INCENTIVE STOCK OPTIONS

- -------------------------------------------------------------------------------

As  permitted  under  accounting  principles  generally  accepted  in the United
States,  we account for our stock-based  compensation  plans using the intrinsic
value  method  prescribed  in  Accounting   Principles  Board  Opinion  No.  25,
"Accounting  for Stock Issued to  Employees,"  and related  Interpretations.  No
stock-based employee compensation expense is reflected in net income because the
exercise  price of our incentive  employee stock options equals the market price
of the underlying  stock on the date of grant.  The following table  illustrates
the effect on net income and earnings per share if we had applied the fair value
recognition  provisions of Statement of Financial  Accounting Standards No. 123,
"Accounting  for  Stock-Based  Compensation"  (SFAS  No.  123),  to  stock-based
employee compensation.


                                                                            

                                      Thirteen Weeks Ended                 Twenty-Six Weeks Ended
                                 August 2, 2003    August 3, 2002      August 2, 2003   August 3, 2002
                                 --------------    --------------      --------------   --------------

     Net income                       $ 4,385          $ 3,667              $12,242           $9,942
     SFAS No. 123 pro forma
     compensation expense,
     net of income taxes                 (432)            (110)                (513)            (228)
                                       -------         --------              -------           ------
     SFAS No. 123 pro forma
     Net income                       $ 3,953          $ 3,557             $ 11,729          $ 9,714
                                      =======          =======             ========          =======



     Pro forma earnings per share:
      *   Basic                       $  0.10          $  0.09               $  .30           $  .25
                                      =======          =======               ======           ======
      *   Diluted                     $  0.10          $  0.09               $  .30           $  .25
                                      =======          =======               ======           ======



     Earnings per share, as reported:
      *   Basic                       $  0.11          $  0.10               $  .32           $  .26
                                      =======          =======               ======           ======
      *   Diluted                     $  0.11          $  0.09               $  .31           $  .25
                                      =======          =======               ======           ======









*    All  share  and per  share  amounts  have  been  adjusted  to  reflect  the
     distribution of a three-for-two stock split on July 1, 2003.

                                       7



Item 2:

                Management's Discussion and Analysis of Financial
                       Condition and Results of Operations

- -------------------------------------------------------------------------------
GENERAL

- -------------------------------------------------------------------------------

Our  business is subject to seasonal  influences,  but has tended to  experience
less seasonal  fluctuation  than many other retailers due to the mix of everyday
basic  merchandise  and pharmacy  business.  The fourth quarter is typically the
most profitable  quarter because it includes the Christmas  selling season.  The
overall strength of the fourth quarter is partially  mitigated,  however, by the
inclusion of the month of January, which is generally the least profitable month
of the year.

The impact of inflation on labor and occupancy  costs can  significantly  affect
our  operations.  Many of our  employees  are paid hourly  rates  related to the
federal  minimum wage and,  accordingly,  any increase  affects us. In addition,
payroll taxes,  employee benefits and other  employee-related  costs continue to
increase.  Occupancy costs,  including rent,  maintenance,  taxes and insurance,
also continue to rise. We believe that maintaining  adequate  operating  margins
through a combination of price adjustments and cost controls, careful evaluation
of occupancy  needs, and efficient  purchasing  practices are the most effective
tools for coping with increasing costs and expenses.

- -------------------------------------------------------------------------------

RESULTS OF OPERATIONS

- -------------------------------------------------------------------------------

Thirteen Weeks Ended August 2, 2003 and August 3, 2002
- ------------------------------------------------------

Net sales  increased to $302.3  million in 2003 from $256.5  million in 2002, an
increase of $45.8 million or 17.9%.  The increase was attributable to comparable
store  sales  increases  of 5.5%  ($13.5  million)  and sales by stores  not yet
included as comparable  stores ($32.4 million).  Sales to franchisees  decreased
$.1  million in 2003.  The sales mix for the period was 50.2%  Hardlines,  33.2%
Pharmacy,  13.9%  Softlines,  and  2.7%  Franchise.  This  compares  with  49.4%
Hardlines,  34.0%  Pharmacy,  13.3%  Softlines,  and 3.3% Franchise for the same
period last year.

Gross profit increased to 28.1% of sales in 2003 compared with 27.2% of sales in
the  prior-year  period.  Gross profit margin  increased as a result of improved
initial markup on shipments,  product mix, and vendor allowances of $1.3 million
associated with the opening of our Georgia distribution facility.

Selling,  general and administrative expenses increased to $78.3 million in 2003
from $64.0  million in 2002.  As a percentage  of sales,  expenses  increased to
25.9% of sales compared to 25.0% of sales last year. The increase in expenses is
primarily  due to cost  associated  with our growth  program  for stores and the
opening of the Georgia distribution facility.

During the second quarter of 2003 interest expense increased by $.1 million when
compared to 2002,  reflecting  additional  borrowings during the quarter for the
store growth program.

For the  second  quarter  of 2003,  the  effective  income  tax rate was  33.4%,
compared with 35.0% for last year.  Income taxes in the second quarter benefited
from federal tax credits that became available in 2002.

Twenty-six Weeks Ended August 2, 2003 and August 3, 2002
- --------------------------------------------------------

Net sales  increased to $613.0  million in 2003 from $514.9  million in 2002, an
increase of $98.1 million or 19.1%.  The increase was attributable to comparable
store  sales  increases  of 5.8%  ($28.5  million)  and sales by stores  not yet
included as comparable  stores ($70.1 million).  Sales to franchisees  decreased
$0.5 million in 2003.  The sales mix for the period was 49.7%  Hardlines,  33.2%

                                       8


Pharmacy,  14.4%  Softlines,  and  2.7%  Franchise.  This  compares  with  48.7%
Hardlines,  34.6%  Pharmacy,  13.3%  Softlines,  and 3.4% Franchise for the same
period last year.

Gross profit increased to 28.2% of sales in 2003 compared with 27.0% of sales in
the prior-year  period.  Gross profit margins  increased as a result of improved
initial markup on shipments and vendor allowances associated with the opening of
our Georgia distribution facility.

Selling, general and administrative expenses increased to $154.2 million in 2003
from $124.0  million in 2002.  As a percentage of sales,  expenses  increased to
25.2% of sales  compared to 24.1% of sales last year.  The  increase in expenses
was  attributable  to cost  associated  with our  store  expansion  program  and
distribution facilities, as well as higher insurance costs.

For the first six months of 2003, we incurred interest expense of $.2 million as
compared  to  interest  income of $0.1  million  last year.  The  difference  is
primarily  resulting from increased  borrowing for the completion of our Georgia
distribution facility.

For the first six  months of 2003,  the  effective  income  tax rate was  33.7%,
compared  with 34.3% for last year.  Income  taxes in the first half of the year
benefited  from  federal tax credits  that became  available  in 2002 and from a
decrease in the valuation allowance taken against state net operating loss carry
forwards.  We anticipate  the tax rate for the remaining two quarters of 2003 to
be in the 35% range.

- -------------------------------------------------------------------------------
LIQUIDITY AND CAPITAL RESOURCES

- -------------------------------------------------------------------------------
Due to the seasonality of our business and the continued  increase in the number
of stores and  pharmacies,  inventories  are generally lower at year-end than at
each quarter-end of the following year.

Cash flows  provided by operating  activities  totaled  $6.1 million  during the
twenty-six week period ended August 2, 2003. Cash was primarily used to increase
inventories by approximately $25.9 million in the first six months of 2003. This
increase was primarily  attributable  to 54  additional  stores in the first six
months  of 2003 as well as  stocking  the new  distribution  facility.  Accounts
payable  decreased  approximately  $5.8  million  during the first six months of
2003.

Cash flows used in investing  activities  totaled $25.3  million,  and consisted
primarily  of  capital  expenditures  associated  with the  store  and  pharmacy
expansion program ($14.6 million),  expenditures for the new distribution center
in Dublin,  Georgia ($7.0  million) and ($3.7  million) for technology and other
corporate expenditures. During the first six months, we opened 56 stores, closed
2 stores,  opened 15 pharmacies,  closed 1 pharmacy and remodeled 20 stores.  We
expect to open approximately 20 stores in the third quarter and approximately 70
to 75 stores for the year. Our capital  expenditure  plan for 2003 is in the $31
million dollar range for store and pharmacy expansion.  Depreciation expense for
the year is in the $24 million dollar range.

Cash flows provided by financing  activities  totaled $13.3 million and included
$5.5  million on June 6, 2003 from  proceeds of 150,000  (pre split)  additional
shares sold and $8.4 million in borrowings under our revolving line of credit to
fund the store  and  pharmacy  growth  program  and  completion  of the  Georgia
distribution  facility.  As of August 2, 2003, we have 376,866 shares of Class A
common  stock  available  to be  issued  from  the  March 6,  2002  Registration
Statement.

On July 31, 2003, we entered into an agreement to modify the new Revolving  Loan
and Credit Agreement (the  "Agreement") with a bank to replace the April 3, 2000
Revolving Loan and Credit Agreement,  as amended. The Agreement provides us with
an unsecured  revolving line of credit commitment of up to $40 million and bears
interest  at a 1.5%  below  prime  rate or a  LIBOR-based  rate.  Under the most

                                       9



restrictive  covenants of the Agreement,  we are required to maintain  specified
tangible  net worth  (which was  $193,852,000  at August 2, 2003) and net income
levels.  We are required to pay a commitment fee to the bank at a rate per annum
equal to .15% on the unutilized  portion of the revolving line  commitment  over
the term of the Agreement.  The term of the Agreement  extends to July 31, 2006.
There was $8.4 million in borrowings  outstanding  under the Agreement at August
2, 2003.

We financed the  construction of our Dublin,  Georgia  distribution  center with
taxable  industrial  development  revenue bonds issued by the City of Dublin and
County of Laurens Development  Authority.  We purchased 100% of the issued bonds
and intend to hold them to maturity, effectively financing the construction with
internal  cash flow. We have offset the  investment  in the bonds  ($33,234,000)
against  the related  liability  and neither is  reflected  on the  consolidated
balance sheet.

We  believe  that  sufficient  capital  resources  are  available  in  both  the
short-term  and long-term  through  currently  available cash and cash generated
from future  operations  and,  if  necessary,  the ability to obtain  additional
financing.

- -------------------------------------------------------------------------------
STOCK SPLIT

- -------------------------------------------------------------------------------

On June 5, 2003, we announced a three-for-two stock split which we effected as a
stock dividend on July 1, 2003 to shareholders of record on June 16, 2003.

- -------------------------------------------------------------------------------
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

- -------------------------------------------------------------------------------

Statements,  other  than  those  based on  historical  facts  that we  expect or
anticipate may occur in the future,  are  forward-looking  statements  which are
based  upon a  number  of  assumptions  concerning  future  conditions  that may
ultimately  prove to be  inaccurate.  Actual  events and results may  materially
differ from anticipated  results  described in such  statements.  Our ability to
achieve such results is subject to certain risks and uncertainties, including:

o         Economic and weather  conditions  which affect buying  patterns of our
          customers;

o         Changes in  consumer  spending  and our ability to  anticipate  buying
          patterns and implement appropriate inventory strategies;

o         Continued availability of capital and financing;

o         Competitive factors;

o         Changes in reimbursement practices for pharmaceuticals;

o         Governmental regulation;

o         Increases in fuel and utility rates; and

o         Other factors affecting business beyond our control.

Consequently,  all of the  forward-looking  statements  are  qualified  by  this
cautionary  statement  and  there  can  be no  assurance  that  the  results  or
developments  anticipated  by us will be  realized  or that  they  will have the
expected effects on our business or operations.  Actual results,  performance or
achievements   can   differ   materially   from   results   suggested   by  this
forward-looking  statement  because of a variety of  factors.  We  undertake  no

                                       10



obligation  to  update  any  forward-looking  statement  to  reflect  events  or
circumstances arising after the date on which it was made.

Item 3.

- -------------------------------------------------------------------------------

QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK

- -------------------------------------------------------------------------------

As of August 2, 2003,  we had no holdings of  derivative  financial or commodity
instruments.  We are exposed to financial  market  risks,  including  changes in
interest  rates.  All  borrowings  under our  Revolving  Credit  Agreement  bear
interest at 1.5% below prime rate or a LIBOR-based rate. An increase in interest
rates of 100 basis points would not significantly  affect our income. All of our
business is transacted in U.S. dollars and,  accordingly,  foreign exchange rate
fluctuations  have  never  had a  significant  impact  on us,  and  they are not
expected to in the foreseeable future.

Item 4.

- -------------------------------------------------------------------------------
CONTROLS AND PROCEDURES

- -------------------------------------------------------------------------------

As of  the  end of  the  period  covered  by  this  report,  we  carried  out an
evaluation,  under  the  supervision  and with the  participation  of our  Chief
Executive  Officer  and  Chief  Financial  Officer,   of  the  effectiveness  of
disclosure  controls and procedures (as defined in Rules  13a-14(c) and 15d-1(c)
under the Securities Exchange Act of 1934). Based on that evaluation,  the Chief
Executive Officer and the Chief Financial Officer, concluded that our disclosure
controls  and  procedures  are  effective  in timely  alerting  them to material
information  required to be included in our periodic SEC reports.  There were no
changes in our internal  control over  financial  reporting  (as defined in rule
13a-15(f)  under the Securities  Exchange Act of 1934) that occurred  during our
most recent fiscal quarter that has materially affected, or is reasonably likely
to materially affect, our internal control over financial reporting.



                                       11



                           PART II. OTHER INFORMATION

Item 1.       Legal Proceedings

                  Not Applicable.

Item 2.       Changes in Securities

                  Not Applicable.

Item 3.       Defaults Upon Senior Securities

                  Not Applicable.

Item 4.       Submission of Matters to a Vote of Securities Holders

               The Annual Meeting of the  Shareholders of Fred's,  Inc. was held
          on June 18, 2003.  Michael J. Hayes, John R. Eisenman,  Roger T. Knox,
          John D.  Reier,  and Thomas H.  Tashjian  were  elected to continue as
          directors  of  the  Company.   The  shareholders   also  ratified  the
          appointment of Ernst & Young LLP as independent public accountants for
          the fiscal year ending January 31, 2004.

          The results of the voting were as follows:

                                                         

                                            Abstain/
                                     For    Against    Withheld   Broker Non-Vote
                                     ---    -------    --------   ---------------
        Election of Directors:
           Michael J. Hayes      18,036,303            6,512,132        1,196,535
           John R. Eisenman      24,173,217              375,218        1,196,535
           Roger T. Knox         24,172,720              375,715        1,196,535
           John D. Reier         18,035,795            6,512,640        1,196,535
           Thomas H. Tashjian    24,172,682              375,753        1,196,535

         Appointment of
         Ernst & Young LLP:      22,949,444  1,588,059                  1,207,467


Item 6.       Exhibits and Reports on Form 8-K

               Exhibits:

               10.15  Third  loan  modification  agreement  dated  July  31,
                      2003 (modifies  the  Revolving  Loan and Credit  Agreement
                      dated April 3, 2000.)
               31.1   Certification of Chief Executive Officer.
               31.2   Certification of Chief Financial Officer.
               32     Certification of Chief Executive Officer and Chief
                      Financial Officer pursuant to 18 U.S.C. Section 1350.


               Reports on Form 8-K:

                 1) Current  Report filed August 21, 2003,  reporting  sales and
                    earnings for the second  quarter  ended August 2, 2003,  and
                    other  matters  relating to the  Company's  operational  and
                    financial condition.

                    Current  Report  filed June 5, 2003,  reporting  information
                    relating to board approval of a  three-for-two  stock split.
                    12



                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.


                                                  FRED'S, INC.

Date:  September 15, 2003
- -------------------------                      ------------------------------
                                                Michael J. Hayes
                                                Chief Executive Officer


Date:  September 15, 2003
- -------------------------                      ------------------------------
                                                Jerry A. Shore
                                                Chief Financial Officer


                                       13










                                       14


                                   SIGNATURES

     Pursuant to the  requirements  of the Securities  Exchange Act of 1934, the
registrant  has duly  caused  this  report  to be  signed  on its  behalf by the
undersigned thereunto duly authorized.

                                                    FRED'S, INC.

                                                    /s/Michael J. Hayes
                                                    -------------------
                                                    Michael J. Hayes
Date:  September 15, 2003                           Chief Executive Officer
- -------------------------




                                                    /s/Jerry A. Shore
                                                    -----------------
                                                    Jerry A. Shore
Date:  September 15, 2003                           Chief Financial Officer
- -------------------------






                                                                   Exhibit 31.1

                    Certification of Chief Executive Officer

I, Michael J. Hayes, certify that:

      1.       I have  reviewed  this  quarterly  report on Form 10-Q of Fred's,
               Inc.;

      2.       Based on my  knowledge,  this  report does not contain any untrue
               statement  of a material  fact or omit to state a  material  fact
               necessary  to  make  the   statements   made,  in  light  of  the
               circumstances   under  which  such   statements  were  made,  not
               misleading with respect to the period covered by this report;

      3.       Based  on my  knowledge,  the  financial  statements,  and  other
               financial  information included in this report, fairly present in
               all  material  respects  the  financial  condition,   results  of
               operations  and cash flows of the  registrant as of, and for, the
               periods presented in this report;

      4.       The registrant's  other certifying  officer and I are responsible
               for   establishing  and  maintaining   disclosure   controls  and
               procedures  (as  defined  in  Exchange  Act Rules  13a-15(e)  and
               15d-15(e))  and internal  control over  financial  reporting  (as
               defined in Exchange Act Rules  13a-15(f)  and  15d-15(f)  for the
               registrant and have:

               a)   Designed such disclosure controls and procedures,  or caused
                    such  disclosure  controls and  procedures  to be designated
                    under our supervision,  to ensure that material  information
                    relating  to  the  registrant,  including  its  consolidated
                    subsidiaries,  is made  known to us by others  within  those
                    entities,  particularly  during  the  period  in which  this
                    report is being prepared;

               b)   Designated such internal  control over financial  reporting,
                    or caused such internal control over financial  reporting to
                    be designed  under our  supervision,  to provide  reasonable
                    assurance  regarding the reliability of financial  reporting
                    and the  preparation  of financial  statements  for external
                    purposes in accordance  with generally  accepted  accounting
                    principles;

               c)   Evaluated the  effectiveness of the registrant's  disclosure
                    controls  and  procedures  and  presented in this report our
                    conclusions   about  the  effectiveness  of  the  disclosure
                    controls and procedures, as of the end of the period covered
                    by this report based on such evaluation; and

               d)   Disclosed  in this  report  any  change in the  registrant's
                    internal  control over  financial  reporting  that  occurred
                    during the registrant's  most recent fiscal quarter that has
                    materially  affected,  or is reasonably likely to materially
                    affect,  the  registrant's  internal  control over financial
                    reporting; and

      5.       The registrant's  other certifying  officer and I have disclosed,
               based on our most  recent  evaluation  of internal  control  over
               financial reporting,  to the registrant's  auditors and the audit
               committee of registrant's board of directors:

               a)   All significant  deficiencies and material weaknesses in the
                    design or  operation  of  internal  control  over  financial
                    reporting  which are reasonably  likely to adversely  affect
                    the registrant's ability to record,  process,  summarize and
                    report financial information; and

               b)   Any fraud, whether or not material, that involves management
                    or  other  employees  who  have a  significant  role  in the
                    registrant's internal control over financial reporting.


Date: September 15, 2003                             --------------------------
                                                     Michael J. Hayes
                                                     Chief Executive Officer

                                       16

                                                                   Exhibit 31.2

                    Certification of Chief Financial Officer

I, Jerry A. Shore, certify that:

        1.     I have  reviewed  this  quarterly  report on Form 10-Q of Fred's,
               Inc.

        2.     Based on my  knowledge,  this  report does not contain any untrue
               statement  of a material  fact or omit to state a  material  fact
               necessary  to  make  the   statements   made,  in  light  of  the
               circumstances   under  which  such   statements  were  made,  not
               misleading with respect to the period covered by this report;

        3.     Based  on my  knowledge,  the  financial  statements,  and  other
               financial  information included in report,  fairly present in all
               material respects the financial condition,  results of operations
               and cash  flows of the  registrant  as of, and for,  the  periods
               presented in this report;

        4.     The registrant's  other certifying  officer and I are responsible
               for   establishing  and  maintaining   disclosure   controls  and
               procedures  (as  defined  in  Exchange  Act Rules  13a-15(e)  and
               15d-15(e))  and internal  control over  financial  reporting  (as
               defined in Exchange Act Rules  13a-15(f)  and  15d-15(f)  for the
               registrant and have:

        a)          Designed such disclosure controls and procedures,  or caused
                    such  disclosure  controls and  procedures  to be designated
                    under our supervision,  to ensure that material  information
                    relating  to  the  registrant,  including  its  consolidated
                    subsidiaries,  is made  known to us by others  within  those
                    entities,  particularly  during  the  period  in which  this
                    report is being prepared;

        b)          Designated such internal  control over financial  reporting,
                    or caused such internal control over financial  reporting to
                    be designed  under our  supervision,  to provide  reasonable
                    assurance  regarding the reliability of financial  reporting
                    and the  preparation  of financial  statements  for external
                    purposes in accordance  with generally  accepted  accounting
                    principles;

        c)          Evaluated the  effectiveness of the registrant's  disclosure
                    controls  and  procedures  and  presented in this report our
                    conclusions   about  the  effectiveness  of  the  disclosure
                    controls and procedures, as of the end of the period covered
                    by this report based on such evaluation; and

        d)          Disclosed  in this  report any  changes in the  registrant's
                    internal  control over  financial  reporting  that  occurred
                    during the registrant's  most recent fiscal quarter that has
                    materially  affected,  or is reasonably likely to materially
                    affect,  the  registrant's  internal  control over financial
                    reporting; and

        5.     The registrant's  other certifying  officer and I have disclosed,
               based on our most  recent  evaluation  of internal  control  over
               financial reporting,  to the registrant's  auditors and the audit
               committee of registrant's board of directors:

        a)          All significant  deficiencies and material weaknesses in the
                    design or  operation  of  internal  control  over  financial
                    reporting  which are reasonably  likely to adversely  affect
                    the registrant's ability to record,  process,  summarize and
                    report financial information; and

        b)          Any fraud, whether or not material, that involves management
                    or  other  employees  who  have a  significant  role  in the
                    registrant's internal control over financial reporting.


Date: September 15, 2003                            ---------------------------
                                                    Jerry A. Shore
                                                    Executive Vice President and
                                                    Chief Financial Officer

                                       17

                                                                  Exhibit  32.1

      Certification of Chief Executive Officer and Chief Financial Officer
                   Pursuant to Section 18 U.S.C. Section 1350

In connection  with this quarterly  report on Form 10-Q of Fred's,  Inc. each of
the  undersigned,  Michael J. Hayes and Jerry A. Shore,  certifies,  pursuant to
Section 18 U.S.C. Section 1350, that:

    1.    The report fully  complies with the  requirements  of Section 13(a) or
          15(d) of the Securities Exchange Act of 1934; and

    2.    The  information  contained  in this report  fairly  presents,  in all
          material respects,  the financial  condition and results of operations
          of Fred's, Inc.


Date: September 15, 2003                          -----------------------------
                                                  Michael J. Hayes
                                                  Chief Executive Officer


                                                  -----------------------------
                                                  Jerry A. Shore
                                                  Executive Vice President and
                                                  Chief Financial Officer

                                       18