Nitches, Inc. Announces Third Quarter Fiscal 2008 Results

Nitches, Inc. (NASDAQ: NICH) announced today its results for the three and nine months ended May 31, 2008. Highlights include:

--  An increase in net sales of $6.8 million, or 35.1%, for the three
    month comparative periods and $6.4 million, or 9.3%, for the nine month
    comparative periods.

--  Operating income of $321,000 for the recent 3 months versus a loss of
    $494,000 in the prior year period.

--  A reduced net loss of $.02 per share for the recent three months
    versus a net loss of $.08 per share for the prior year period.

--  Signing of a multi-year sublicense agreement for a line of Paula
    Deen® scented candles to be distributed primarily to Wal-Mart under the
    Company's license for the brand.
    

Operating Results

Nitches reported that consolidated net sales for the third quarter of fiscal 2008 increased 35.1% to $26.3 million versus $19.5 million for the third quarter of 2007. The sales increase was attributable primarily to the inclusion of results from Backwoods®, a specialty retail chain selling outdoor lifestyle products, which the Company acquired in February 2008. Incremental sales of home décor products, notably new Paula Deen® branded dinnerware, as well as women's sleepwear and men's sportswear also contributed to the increase. Consolidated net sales for the nine months ended May 31, 2008 increased 9.3% to $75.6 million versus $69.2 million for the nine months ended May 31, 2007.

The Company reported a consolidated net loss of $129,000 for the third quarter of fiscal 2008 versus a net loss of $432,000 in the third quarter last year. The third quarter loss per basic and diluted share was $.02 versus a loss of $.08 per basic and diluted share for the third quarter of fiscal 2007. Consolidated net loss of $1.5 million for the nine months ended May 31, 2008 compares with net income of $249,000 for the nine months ended May 31, 2007. For the current year period, the loss was $.26 per basic and diluted share versus earnings of $.05 per basic share and diluted share for the first nine months of fiscal 2007.

Earnings continued to be negatively impacted during the current three and nine month periods by lower realized gross margins due to pricing pressures and higher sales allowances granted to significant customers amid a weakening retail environment. Furthermore, noncash amortization and stock compensation expenses, an increase in both cash and noncash interest expenses related to the Company's convertible debentures issued in June 2007, as well as increased borrowings under the Company's factoring agreement, all contributed to the net loss.

At May 31, 2008, the Company had unfilled customer orders of $31.1 million compared to $45.2 million at the same time last year, with such orders generally scheduled for delivery by November 2008 and November 2007, respectively. The decrease in backlog is primarily due to reductions in orders for the Company's women's sleepwear and men's and women's sportswear, offset partially by an increase in orders for new Paula Deen® dinnerware and related items sold under license. The reduction in orders is attributable to the general slowdown in the U.S. economy, as well as the decision by management to not accept sales where the risk of retailer markdowns (deductions claimed by retailers against invoices due) is deemed to be too high.

"We are pleased with our top line revenue growth of 35.1% for the quarter and 9.3% for the year," commented Steve Wyandt, Chairman and CEO of Nitches. "We also continue to have success controlling the cash-based expenses of our operations. However, the persistent poor gross margin performance of our wholesale businesses reflects the pressures we are facing from higher costs of supply with no commensurate increase in wholesale prices, as well as our exposure to credit losses and markdown claims from retailers."

As for the reduction in wholesale order backlog, Mr. Wyandt remarked, "Mergers, store closings and bankruptcies are reducing our wholesale customer base. Additionally, the erosion of wholesale gross margins warrants a more cautious approach to our traditional markets. As we shift our revenue mix from lower margin private label products to higher margin branded lines of business such as our Paula Deen® products and direct ownership of Backwoods® specialty retail stores, we are being more selective about who we sell to in our wholesale product lines."

Paula Deen® License

Nitches also announced the signing of a multi-year sublicense agreement with MVP Group International, Inc. to produce and distribute a line of Paula Deen® candles primarily for sale to Wal-Mart. The candles will be food-scented based on popular recipes of celebrity chef and Food Network television personality Paula Deen. MVP has already received orders to ship Paula Deen® branded candles to approximately 1,000 Wal-Mart stores for the Fall 2008 season. MVP is a major candle supplier to U.S. discount retailers, drug stores, and mass merchants. The sublicense was issued under the Company's broad license to produce, distribute and sublicense Paula Deen® branded products.