In the stores that are already upgraded, management sees single-digit sales growth so far, including significant improvements in the pet department, says Michael Hayes, the company's chief executive officer during its first-quarter conference call. The retailer's exterior renovations are on track to start next year, he says.

Management expects same-store sales to rise between 2% and 4% year over year in the second quarter. The renovation work is expected to disrupt sales during the first two months of the period, but Hayes says Fred's should see a pick up in the third part of the period.

During the first quarter, which ended May 9, same-store sales rose 1.9%, while total sales increased 6%, to $442.3 million. Net income inched up 2%, to $7.4 million.