EXHIBIT 16.1




July 30, 2004



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


We have  read Item 4 of  Amendment  No.1 to Form 8-K dated  July 30,  2004,  of
Fred's,  Inc. and are in agreement  with the  statements  contained in paragraph
one, sentences one, three, and six;  paragraphs three and four;  paragraph five,
sentences  one, two, and three;  and paragraph six 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  the  weaknesses in internal
control  to  prepare  financial  statements,  included  in the fifth  paragraph,
sentences one and three,  on page 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