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EXHIBIT 16.1 TO FORM 8-K





July 9, 2004





Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC  20549

We have read Item 4 of Form 8-K dated July 9, 2004,  of Fred's,  Inc. and are in
agreement  with the  statements  contained in paragraph  one,  sentences one and
five;  paragraphs  two and three;  paragraph  four,  sentences  one and two; and
paragraph  five on  pages  one and two  therein.  We have no  basis  to agree or
disagree with other statements of the registrant contained therein.

Regarding the registrant's  statement concerning  weaknesses in internal control
to prepare financial statements, included in the fourth paragraph, sentences one
and two,  on  pages  one and two  therein,  we had  considered  such  matter  in
determining the nature,  timing, and extent of procedures performed in our audit
of the registrant's 2003 financial statements.




                                           /s/ Ernst & Young LLP