Eddie Bauer Holdings reported net income for the fourth quarter of $63.2 million, or $2.11 per share, compared to a net loss of $12.8 million, or 43 cents, in the fourth quarter of 2005. Revenues increased 1.5% to $381.9 million from $376.4 million a year ago.

The net loss of $12.8 million in the fourth quarter of 2005 included a $1.2 million loss from discontinued operations, or $0.04 per diluted share.

Total revenues for the fourth quarter of 2006 included net merchandise sales of $365.2 million, shipping revenues of $10.0 million, licensing royalty revenues of $4.7 million and royalty revenues from foreign joint ventures of $2.0 million. In the fourth quarter of 2005,total revenues included net merchandise sales of $360.7 million, shipping revenues of $9.6 million, licensing royalty revenues of $4.3 million, royalty revenues from foreign joint ventures of $1.7 million, and other revenues of $0.1 million.

Net merchandise sales for the fourth quarter of 2006 included $270.9 million of sales from the company's retail and outlet stores and $94.3 million of sales from its direct channel, which includes sales from its catalogs and websites. This compares to $266.6 million of sales from the company's retail and outlet stores and $94.1 million of sales from its direct channel in the same period last year. Comparable store sales for the fourth quarter of 2006 increased by 4.6%. Comparable store sales include net sales from retail and outlet stores that have been open for one complete fiscal year.

Gross margin for the fourth quarter of 2006 totalled $164.4 million, representing an increase of $2.6 million from $161.8 million for the fourth quarter of 2005. Gross margin percentage for the fourth quarter of 2006 increased to 45.0%, compared to 44.8% for the year-ago period, reflecting lower levels of markdowns in 2006 compared to 2005 partially offset by costs related to the company's loyalty program launched in the second half of 2006.

The company reported net income for the fourth quarter of 2006 of $63.2 million, or $2.11 per diluted share, compared to a net loss of $12.8 million, or $0.43 per diluted share, in the fourth quarter of 2005. The net loss of $12.8 million in the fourth quarter of 2005 included a $1.2 million loss from discontinued operations, or $0.04 per diluted share.

Income tax expense/(benefit) for the fourth quarter of fiscal 2006 was a benefit of $18.7 million compared to expense of $20.4 million in the fourth quarter of fiscal 2005.

Income (loss) from continuing operations before income taxes, interest expense and depreciation and amortization expense, or EBITDA, for the fourth quarter of 2006 was $66.0 million, compared to $68.1 million for the year-ago fourth quarter, after excluding the $40.0 million trademark impairment charge recognized during the fourth quarter of 2005. EBITDA is a non-GAAP financial measure that management believes is an important metric because it is a key factor in how it measures operating performance. See Unaudited Supplemental Financial Information for a reconciliation of EBITDA to its most comparable GAAP measure income (loss) from continuing operations before reorganization items and income tax expense. In addition, the company incurred pre-tax non- cash stock-based compensation expense of $2.1 million in the fourth quarter of 2006, compared to stock-based compensation expense of $3.6 million in the fourth quarter of 2005. The company also incurred approximately $1.9 million in professional fees in the fourth quarter of fiscal 2006 associated with the exploration of strategic alternatives and the company's proposed sale.

“Results for the fourth quarter reflect a solid response from customers to our refocused merchandise assortment, which led to positive comparable stores sales and reduced markdowns,” said Howard Gross, Interim Chief Executive Officer of Eddie Bauer. We were particularly pleased with the performance of down outerwear and gift items. Our objective going forward is to build on this momentum by continuing to refine our merchandising strategies while remaining clearly focused on the needs and preferences of our core customers. We are encouraged that fiscal 2007 has gotten off to a strong start with comparable store sales for the quarter-to-date period through March 10th up 9.5% and sales in our direct channel up 12.9%.”

The company noted that sales increases of the magnitude achieved to date in the 2007 first quarter are not necessarily indicative of future sales increases. The company further noted that earnings for the first fiscal quarter of 2007 will be negatively impacted by a $5 million charge related to expense reimbursement it was required to pay as a result of the previously announced termination of its merger agreement with an affiliate of Sun Capital Partners and Golden Gate Capital, as well as professional fees related to the proposed sale, and a charge of approximately $5 million associated with the resignation of the company's former Chief Executive Officer. The company has previously stated that it expects it would take approximately 12 to 18 months before EBITDA results would begin to significantly improve in the event of a successful turnaround.

The company is moving forward with its turnaround strategy and is focused on taking the steps necessary to position itself for success as an independent company, including strengthening its management team. The company recently engaged Spencer Stuart, one of the world's leading executive recruitment firms, to lead its search for a permanent CEO, and the company is actively recruiting for other currently vacant senior and middle management positions.

In addition, the company is in active discussions to refinance its existing $275 million term loan. Previously, the company had disclosed that it expected that it would not meet certain loan covenants in fiscal 2007 and would be required to refinance its existing debt. The company is currently working with its financial advisors and potential lenders on a refinancing package that would include a new term loan and junior capital, and expects to complete the transaction in early April 2007. The company noted that it expects that the refinancing will not be completed by the time its financial statements for 2006 must be filed with the Securities and Exchange Commission, and, as a result, it expects the Report of Independent Registered Public Accounting Firm may include an explanatory paragraph in respect of the company's ability to continue as a going concern. The company's Form 10-K is required to be filed by March 30, 2007.

FISCAL 2006 RESULTS

For the fiscal year ended December 30, 2006, total revenues were $1,013.4 million, compared to $1,059.4 million in the same period last year. Total revenues for 2006 included net merchandise sales of $956.7 million, shipping revenues of $34.0 million, licensing royalty revenues of $15.7 million, royalty revenues from foreign joint ventures of $6.6 million, and other revenues of $0.4 million. In fiscal year 2005, total revenues included net merchandise sales of $1,001.5 million, shipping revenues of $35.7 million, licensing royalty revenues of $15.3 million, royalty revenues from foreign joint ventures of $6.1 million, and other revenues of $0.8 million.

Net merchandise sales for 2006 included $700.1 million of sales from the company's retail and outlet stores and $256.5 million of sales from its direct channel. This compares to $733.2 million of sales from the company's retail and outlet stores and $268.1 million of sales from its direct channel in 2005. Comparable store sales for fiscal year 2006 declined 2.0%.

Gross margin for fiscal 2006 was $353.5 million, representing a decrease of $51.1 million from the gross margin for the same period last year. Gross margin percentage for the year declined to 37.0%, compared to a gross margin percentage of 40.4% for 2005. The principal factors impacting the decline in gross margin percentage for 2006 were higher occupancy costs, lower net merchandise sales in which to absorb the company's fixed store related costs, higher markdowns in the first three quarters of the year, and costs associated with the launch of the company's customer loyalty program in the second half of 2006.

The company's net loss for the year was $212.0 million, or a loss of $7.06 per diluted share, compared to net income of $38.1 million in 2005. No earnings per share data is available for fiscal 2005 as the company didn't have shares outstanding until its emergence from bankruptcy in June of 2005. The 2006 net loss includes a previously announced goodwill impairment charge of $117.6 million recorded in the 2006 third quarter and increased tax expense in the second and third quarters of 2006 of $23.5 million and $52.7 million, respectively, to increase the tax valuation allowance related to the company's net operating losses. The net income of $38.1 million for 2005 included a $4.1 million loss from discontinued operations, as well as a second quarter 2005 pre-tax gain of $107.6 million related to the company's emergence from bankruptcy and its required adoption of fresh start accounting.

Income (loss) from continuing operations before income taxes, interest expense and depreciation and amortization expense, or EBITDA, for 2006 was $53.3 million, adjusted for the $117.6 million goodwill impairment charge, compared to $107.7 million for 2005 when excluding the company's $13.7 million of reorganization expenses and $107.6 million gain recorded upon its emergence from bankruptcy and the above-mentioned $40.0 million trademark impairment charge. In addition, the company incurred pre-tax non-cash stock-based compensation expense of $10.2 million in 2006, compared to stock-based compensation expense of $3.6 million in 2005. During fiscal 2006, the company incurred approximately $3.3 million in professional fees associated with the exploration of strategic alternatives and the company's proposed sale.

As of December 30, the company operated 394 retail and outlet stores in total, consisting of 279 retail stores and 115 outlet stores. The company opened five retail stores and one outlet store during the fourth quarter and closed one retail store.