Perfumania Holdings, Inc. Discusses Current Business Trends, Second Quarter Results and Outlook

Business Wire, Sept 26, 2008

BELLPORT, N.Y. -- Perfumania Holdings, Inc. (NASDAQ: PERF) will host a conference call today, September 26, 2008 at 11:00 AM Eastern Time, to discuss current business trends, certain performance expectations, and recent quarterly results for Perfumania Holdings, Inc. (formerly, E Com Ventures, Inc.) (the "Company") and Model Reorg, Inc. ("Model Reorg") contained in Form 10-Q filed on September 16, 2008.

Summary

Michael Katz, President and Chief Executive Officer of the Company said, "While we are pleased with the 2.9% same store sales increase in the Perfumania stores in the second fiscal quarter, decelerating sales trends in August and September across both the retail and wholesale segments of our business have caused us to adopt a more cautious tone for our near-term outlook. For the first seven weeks of the Company's fiscal third quarter, same store sales in the Perfumania stores are running down 2.9%. This compares with same store sales increases of 2.9% in the second fiscal quarter and 3.0% in the first fiscal quarter. We believe the recent change in trend is related to the ongoing difficult retail environment, as the decelerating sales trends have impacted our older as well as our newer stores. As a result, we are now projecting same store sales to decline 2.5% for the fiscal quarter ending October 31, 2008 versus a previous estimated increase of 5%. While the Model Reorg business is performing more in line with expectations, this business is being negatively impacted by inventory reduction programs and conservative buying patterns from many of our large retail customers.

On a more positive note, we are pleased with the early integration of the Model Reorg business. While the current environment certainly has its challenges, we are excited about the opportunities and prospects afforded by the merger of Model and Perfumania. The merger will enable us to pursue future growth strategies, take advantage of the synergies between the two companies, and position ourselves as a large, independent, national, vertically integrated specialty retailer and wholesale distributor of designer perfumes and fragrances."

Outlook

While the Company has not previously provided any type of financial guidance, the July 25, 2008 Proxy filing contained selected financial projections for the combined company (E Com Ventures and Model Reorg) for certain twelve-month periods ending October 31. As a result of decelerating same store sales trends in its specialty retail stores and cautious buying patterns by many large wholesale customers, the Company is lowering the October 2008 net income projection contained in the Proxy filing to $9.0-$10.0 million from a previous projection of $14.3 million. This estimate excludes approximately $1.5 million non-recurring merger expenses and any future special charges related to the merger and consolidation of the E Com Ventures and Model Reorg businesses. The company is in the process of deriving pro-forma projections for the combined company for the twelve-month period ending January 31, 2009 and intend to provide quarterly pro-forma combined results for the Company's first three quarters for fiscal 2008 in the third quarter fiscal 2008 press release.

Perfumania quarter ended August 2, 2008 versus quarter ended August 4, 2007

* Total net sales decreased 15.3% to $62.1 million from $73.4 million;

* Retail sales increased 10.5% to $57.4 million from $52.0 million and wholesale sales decreased 78.0% to $4.7 million from $21.4 million;

* Comparable store sales (sales for stores open at least 12 months) increased 2.9% versus an increase of 1.2% last year;

* Gross profit increased 7.0% to $26.7 million from $25.0 million and gross margin increased 890 basis points to 43.0% from 34.1%;

* Selling, general and administrative (SG&A) expenses increased 18.7% to $27.1 million from $22.9 million. As a percentage of sales, SG&A expenses increased 1,250 basis points to 43.6% from 31.1%;

* Loss from operations was $2.2 million compared to income from operations of $600,000 and depreciation and amortization increased to $1.9 from $1.5 million;

* Net loss increased to $2.0 million from $400,000, and net loss per common share increased to $0.65 from $0.14;

* Number of stores at quarter end increased 17.5% to 323 from 275.

Model Reorg quarter ended July 31, 2008 versus quarter ended July 31, 2007

* Net sales decreased 5.6% to $63.8 million from $67.6 million;

* Gross profit decreased 8.8% to $17.8 million from $19.5 million and gross margin decreased 90 basis points to 27.9% from 28.8%;

* Selling, warehouse, delivery and administrative expenses decreased to $13.1 million, or 20.5% of net sales, from $13.4 million, or 19.8% of net sales;

* Income from operations decreased 26.6% to $4.2 million from $5.7 million and depreciation and amortization increased to $460,000 from $338,000;

* Net income decreased 19.3% to $1.3 million from $1.7 million.

Model Reorg Acquisition

On August 11, 2008, Perfumania Holdings, Inc. completed its acquisition of Model Reorg, Inc. when Model Reorg merged into the Company's wholly owned subsidiary, Model Reorg Acquisition LLC. The transaction occurred subsequent to the Company's second fiscal quarter of 2008 which ended on August 2, 2008, and thus the financial statements and notes to condensed consolidated financial statements in the Form 10-Q dated September 16, 2008 include the results of the Company prior to the acquisition of Model Reorg.