Cache Reports Third Quarter and Nine Months Results; Third Quarter Diluted Loss Per Share Totals $0.03; Nine Months Operating Income Rises 23.0%; Reiterates Comfort with Earnings Guidance

Business Wire, Oct 19, 2004

NEW YORK -- Cache Inc., (NASDAQ:CACH), a specialty chain of women's apparel stores with 278 stores currently open, reported results for the 13 and 39 week periods ended September 25, 2004, with each period reflective of the 3 for 2 stock split completed on June 18, 2004.

For the 13 week period ended September 25, 2004 ("Third Quarter"):

--Net sales increased 4.4% to $49.4 million compared to $47.3 million in the third quarter of 2003 and comparable store sales declined 2.0%;

--Net loss was $521,000, or ($0.03) per diluted share, as compared to net income of $614,000, or $0.04 per diluted share in the third quarter of 2003;

--Working capital increased $10.9 million to $47.6 million, as compared to $36.7 million at September 27, 2003.

For the 39 week period ended September 25, 2004 ("Nine Months"):

--Net sales increased 11.3% to $168.7 million, as compared to $151.6 million in the first nine months of 2003 and comparable store sales gained 4.0%;

--Operating income rose 23.0% to $11.3 million, or 6.7% of net sales, as compared to $9.2 million, or 6.1% of net sales in the first nine months of 2003;

--Diluted earnings per share increased 10.0% to $0.44 on 15,967,000 shares compared to $0.40, on 14,449,000 shares in the first nine months of 2003.

Mr. Brian Woolf, Cache's Chairman commented: "Our third quarter was challenging due to temporary store closings and reduced traffic in Florida, and the Southeast generally, as a result of hurricanes; lower quarterly sales than originally anticipated; and increased markdowns taken during the third quarter to reduce dress inventory and clear spring and summer sportswear. While results for the quarter were below the third quarter, a year ago, we believe we are positioned to report increased sales and earnings in the fourth quarter. To this point, October sales are currently on plan despite the impact of hurricane Jeanne during the first weekend of the month. Additionally, our inventory levels are below last September, on a per store basis and are well positioned for the fall selling season."

Additionally, during the third quarter, the Company:

--Opened 5 Cache stores and 2 new Lillie Rubin prototype stores and at quarter-end operated 276 stores in 43 states; and

--Remodeled 4 stores with 42.0% of its Cache store base in the new store format at quarter-end.

Gross profit in the third quarter was $19.6 million, or 39.6% of net sales, compared to $20.2 million, or 42.7% of net sales, in the third quarter of 2003. The decline in third quarter gross profit versus the year ago period was primarily due to increased fixed occupancy costs and additional markdowns taken during the quarter to clear end-of-season merchandise. For the first nine months of fiscal 2004, gross profit rose to $74.4 million, or 44.1% of net sales, compared to $65.2 million, or 43.0% of net sales, in the prior year period. The improvement in gross profit margin for the first nine months of fiscal 2004 reflected higher initial merchandise markups versus the prior year periods.

In total, operating expenses for the third quarter were $20.6 million, or 41.6% of net sales compared to $19.3 million, or 40.7% of net sales in the third quarter of fiscal 2003. For the first nine months of fiscal 2004, total operating expenses were $63.1million, or 37.4% of net sales compared to $56.0 million, or 36.9% of net sales in the prior year period. The rise in total operating expenses for the third quarter and first nine months of fiscal 2004 was primarily due to the increase in the number of stores opened since the same periods last year. This was partially offset by reduced incentive compensation expense, which lowered general and administrative expenses in both the third quarter and first nine months of fiscal 2004, as compared to the same periods last year.

At September 25, 2004, cash and marketable securities totaled $36.9 million, rising $8.8 million from $28.1 million at September 27, 2003. Inventory was $31.1 million, as compared to $27.3 million at September 27, 2003, primarily due the number of new stores over the past 12 months.

Mr. Woolf continued: "We are pleased with our nine month results, which demonstrate the strength and growing consumer awareness of our Cache and Lillie Rubin brands. As we look ahead, we remain focused and excited about our outlook. Positioning us for growth is the favorable response and increasing importance of our sportswear assortments. This, combined with the stability in our dress business, has us poised to report increases in sales and earnings in the fourth quarter."

A table summarizes financial results follows:

Thirty-nine Weeks Ended   Thirteen Weeks Ended
                       -----------------------   --------------------
                       Sept. 25,     Sept. 27,   Sept. 25,   Sept. 27,
                         2004          2003        2004        2003
                         ----          ----        ----        ----
                           ($ Thousands, except for per share data)

Sales                  $ 168,711     $151,634    $ 49,430    $ 47,343

Operating income
 (loss)                $  11,292     $  9,184     $  (961)   $    936

Net income (loss)      $   7,089     $  5,796     $  (521)   $    614

Basic earnings (loss)
 per share             $    0.46     $   0.41    $  (0.03)   $   0.04

Diluted earnings (loss)
 per share             $    0.44     $   0.40    $  (0.03)   $   0.04

Basic weighted average
 shares outstanding   15,569,000   14,022,000  15,634,000  14,691,000

Diluted weighted
 average shares
 outstanding          15,967,000   14,449,000  15,634,000  15,120,000