SOURCE: Big Dog Holdings, Inc.

March 29, 2006 08:00 ET

Big Dog Holdings, Inc. Reports 4th Quarter and 2005 Year Sales and Earnings and Recent Events

SANTA BARBARA, CA -- (MARKET WIRE) -- March 29, 2006 -- Big Dog Holdings, Inc. (NASDAQ: BDOG); www.bigdogs.com, www.thewalkingcompany.com, a developer and retailer of branded, lifestyle consumer products, today reported the financial results for the fourth quarter and year ended December 31, 2005.

As previously announced, consolidated net sales for the fourth quarter were $59.4 million, a 6.6% increase as compared to $55.7 million in the same quarter of 2004. Our consolidated net sales increased primarily due to the additional stores opened during the period and a 23% increase in mail order/Internet revenue of $.6 million, offset by a comparative store sales decrease of .6% (the Big Dogs chain had a comparative store sales decrease of 6.6% while TWC has a comparative store sale increase of 7.0%). The Company had a total of 268 stores opened (176 Big Dog stores and 92 Walking Company stores) at the end of the period, as compared with 188 Big Dog stores and 74 TWC stores on December 31, 2004. Consolidated net sales for the year ended December 31, 2005 were $179.1 million, an 11.0% increase, as compared to $161.4 million in 2004. Comparable retail store sales increased 3.3% for the year (4.1% decline for the Big Dogs chain and 12.8% increase for the TWC chain.)

Consolidated earnings were $.38 per share for the fourth quarter 2005, as compared to $.43 per share earned for the same period in 2004. Consolidated earnings for the year ended December 31, 2005 were $.49 per share, as compared to $.40 per share in 2004. Consolidated net income was $3.6 million and $4.7 million for the fourth quarter and year 2005, respectively, as compared to $4.1 million and $3.7 million for the same periods in 2004. For the quarter ended December 31, 2005, the Company's gross margins for the fourth quarter were 54.9% in 2005 as compared to 55.5% for the same period in 2004. The decline in gross margin was the result of a one time pick up at TWC in 2004 and a shift in business from Big Dogs to TWC. Gross margins for the year ended 2005 were 55.2% compared to 54.9% for 2004. Consolidated operating expenses were 44.4% and 50.4% of sales for the fourth quarter and year ended 2005, respectively, as compared to 43.2% and 50.8%, respectively, for 2004. Higher operating expenses in 2005 reflect the smaller Big Dog store chain among other expenses.

Commenting on the 2005 results and looking towards 2006, CEO Andrew Feshbach stated, "We are pleased with our overall results for 2005. We have integrated the Footwork's acquisition and see positive comp sales at these stores, we completed our new store design for TWC and it is now ready to be rolled out across the country and we have invested in our infrastructure to support our future growth. Although our net income declined in the 4th quarter, we see this decline largely as a result of non-recurring type events as well as revenue declines at the Big Dog chain. We are excited about our future prospects as we look toward 2006 and beyond. With the acquisition of Steve's Shoes, we believe we will end the year at approximately 150 TWC stores as compared to 92 at the end of 2005. We also will have approximately 150 Big Dog stores at the end of the year. The acquisition of the Steve's chain was on a good financial basis but it was operationally distressed when we acquired it. We believe we will have it stabilized and integrated into the TWC chain. At Big Dogs we continue to work to unlock the value of our brand through management of our current channel strategy. Regarding sales for the first 6 months of the year, we see similar trends for both divisions as occurred in the fourth quarter for 2005."

Big Dog Holdings, Inc. consists of Big Dogs and The Walking Company. Big Dogs develops, markets and retails a branded, lifestyle collection of unique, high-quality, popular-priced consumer products, including activewear, casual sportswear, accessories and gifts. The BIG DOGS® brand image is one of quality, value and fun. The BIG DOGS® brand is designed to appeal to people of all ages and demographics, particularly baby boomers and their kids, big and tall customers, and pet owners. In addition to its 167 retail stores, Big Dogs markets its products through its catalog and Internet. The Walking Company is the leading specialty retailer of high-quality, technically designed comfort shoes and accessories that features premium brands such as ECCO, Mephisto, Dansko and Merrell, among many others. These products have particular appeal to one of the largest and most rapidly growing demographics in the nation. The Walking Company operates 130 stores in premium malls across the nation.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995-

This press release contains forward-looking statements that involve risks and uncertainties. The statements contained in this press release that are not purely historical are forward-looking statements, including without limitation statements regarding our expectations, beliefs, intentions or strategies. The factors that may affect the outcome of such forward-looking statements include (i) changes in consumer preferences, (ii) factors affecting store traffic, (iii) competition from other companies, and (iv) the ability to retain key personnel. Further information on the Company's risk factors is contained in the Company's quarterly and annual reports as filed with the Securities and Exchange Commission.

            BIG DOG HOLDINGS, INC. AND SUBSIDIARIES
                  CONSOLIDATED BALANCE SHEETS

                                                       December 31,
                                               ---------------------------
                                                   2005            2004
                                               ------------   ------------

                         ASSETS
CURRENT ASSETS:
   Cash and cash equivalents                   $  3,530,000   $  4,670,000
   Receivables, net                                 894,000        411,000
   Inventories                                   44,518,000     39,581,000
   Prepaid expenses and other current assets      1,046,000        928,000
   Deferred income taxes                          1,681,000      1,691,000
                                               ------------   ------------
     Total current assets                        51,669,000     47,281,000
PROPERTY AND EQUIPMENT, Net                      11,931,000      9,956,000
INTANGIBLE ASSETS, Net                            4,473,000        172,000
GOODWILL                                          3,131,000              -
DEFERRED INCOME TAXES                             1,187,000      1,042,000
OTHER ASSETS                                        362,000        380,000
                                               ------------   ------------
   TOTAL                                       $ 72,753,000   $ 58,831,000
                                               ============   ============

           LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
   Short-term borrowings                       $  2,796,000   $    304,000
   Current portion of long-term debt              1,775,000        243,000
   Accounts payable                               7,478,000      5,033,000
   Income taxes payable                           1,367,000      2,643,000
   Accrued expenses and other current
    liabilities                                   6,615,000      6,331,000
                                               ------------   ------------
     Total current liabilities                   20,031,000     14,554,000
NOTES PAYABLE                                     4,565,000        289,000
CAPITAL LEASE OBLIGATIONS                            47,000        256,000
DEFERRED RENT AND LEASE INCENTIVES                1,468,000        943,000
DEFERRED GAIN ON SALE-LEASEBACK                     195,000        248,000
                                               ------------   ------------
   Total liabilities                             26,306,000     16,290,000
STOCKHOLDERS' EQUITY                             46,447,000     42,541,000
                                               ------------   ------------
   TOTAL                                       $ 72,753,000   $ 58,831,000
                                               ============   ============





                  BIG DOG HOLDINGS, INC. AND SUBSIDIARIES
                   CONSOLIDATED STATEMENTS OF OPERATIONS

                        Three Months Ended             Year Ended
                           December 31,                December 31,
                    --------------------------  --------------------------
                        2005          2004          2005          2004
                    ------------  ------------  ------------  ------------
NET SALES           $ 59,420,000  $ 55,739,000  $179,115,000  $161,358,000
COST OF GOODS SOLD    26,809,000    24,799,000    80,311,000    72,733,000
                    ------------  ------------  ------------  ------------
GROSS PROFIT          32,611,000    30,940,000    98,804,000    88,625,000
                    ------------  ------------  ------------  ------------
OPERATING EXPENSES:
   Selling, marketing
    and distribution  22,975,000    21,585,000    80,624,000    73,956,000
   General and
    administrative     3,395,000     2,516,000     9,631,000     8,060,000
                    ------------  ------------  ------------  ------------
      Total operating
       expenses       26,370,000    24,101,000    90,255,000    82,016,000
                    ------------  ------------  ------------  ------------
INCOME FROM
 OPERATIONS            6,241,000     6,839,000     8,549,000     6,609,000
OTHER INCOME                   -             -             -        82,000
INTEREST INCOME            2,000         1,000        44,000        26,000
INTEREST EXPENSE        (358,000)     (238,000)     (976,000)     (857,000)
                    ------------  ------------  ------------  ------------
INCOME BEFORE
 PROVISION
   FOR INCOME TAXES    5,885,000     6,602,000     7,617,000     5,860,000
PROVISION FOR INCOME
   TAXES               2,236,000     2,453,000     2,894,000     2,172,000
                    ------------  ------------  ------------  ------------
NET INCOME          $  3,649,000  $  4,149,000  $  4,723,000  $  3,688,000
                    ============  ============  ============  ============
NET INCOME PER SHARE
   BASIC            $       0.40  $       0.45  $       0.52  $       0.42
                    ============  ============  ============  ============
   DILUTED          $       0.38  $       0.43  $       0.49  $       0.40
                    ============  ============  ============  ============

WEIGHTED AVERAGE
 SHARES OUTSTANDING:

   BASIC               9,075,000     9,178,000     9,145,000     8,722,000
                    ============  ============  ============  ============
   DILUTED             9,664,000     9,732,000     9,726,000     9,174,000
                    ============  ============  ============  ============

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