Big Dog Q1 Net Loss Widens Despite 14% Sales Gain

Big Dog Holdings reported that consolidated net sales for the 2007 first quarter were $44.2 million, a 14% increase from $38.7 million in the first quarter 2006. The increase was primarily due to the addition of 13 net new The Walking Company stores.

The company had a total of 295 stores opened (145 Big Dogs stores and 150 TWC stores) at the end of the period, as compared with 304 stores opened on March 31, 2006 (167 Big Dogs stores and 137 TWC stores.) Comparable retail store sales increased 7.0% for the quarter (12.6% increase for TWC chain and 5.0% decline for the Big Dogs chain.)

Total consolidated gross profit for the quarter increased 70 basis points to 52.7% of net sales compared with 52.0% of net sales in the year-ago period. Gross margin for TWC and Big Dogs increased to 52.0% and 54.5% compared to 51.6% and 52.7%, respectively, for the same period last year.

Consolidated operating expenses in the first quarter 2007 were $29.2 million, or 66.0% of sales, compared to $24.9 million, or 64.4% of sales, in 2006. The percentage increase in consolidated operating expenses primarily relates to the Big Dogs' smaller revenue base, additional expenses relating to the relocation of the company's distribution center and an increase in depreciation and amortization expenses. Consolidated operating loss for the first quarter 2007 was $5.9 million compared to $4.8 million for the first quarter 2006. The consolidated net loss per share for the first quarter 2007 increased to 44 cents per share, as compared with a consolidated net loss of 35 cents per share for the first quarter 2006.

Company CEO Andrew Feshbach stated, “We had a $1.1 million increase in our operating loss this quarter versus last year, which is primarily the result of an increase in depreciation, one-time expenses incurred due to our distribution center move, and the decline in our Big Dogs business. Our outlook for the 2nd quarter is optimistic as our TWC business continues to perform strongly. We also believe our Big Dog business is stabilizing and the start up of our distribution center is complete which will all contribute to a successful 2nd quarter.”

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


                                                    Three Months Ended
                                                        March 31,
                                                --------------------------
                                                    2007          2006
                                                ------------  ------------

NET SALES                                       $ 44,224,000  $ 38,671,000
COST OF GOODS SOLD                                20,924,000    18,574,000
                                                ------------  ------------
GROSS PROFIT                                      23,300,000    20,097,000
                                                ------------  ------------
OPERATING EXPENSES:
 Selling, marketing and distribution              25,340,000    21,540,000
 General and administrative                        2,055,000     2,020,000
 Depreciation and amortization                     1,815,000     1,326,000
                                                ------------  ------------
   Total operating expenses                       29,210,000    24,886,000
                                                ------------  ------------
LOSS FROM OPERATIONS                              (5,910,000)   (4,789,000)
INTEREST INCOME                                        3,000         2,000
INTEREST EXPENSE                                    (706,000)     (269,000)
                                                ------------  ------------
LOSS BEFORE BENEFIT FROM INCOME TAXES             (6,613,000)   (5,056,000)
BENEFIT FROM INCOME TAXES                         (2,478,000)   (1,896,000)
                                                ------------  ------------
NET LOSS                                        $ (4,135,000) $ (3,160,000)
                                                ============  ============
NET LOSS PER SHARE
 BASIC                                          $      (0.44) $      (0.35)
                                                ============  ============
 DILUTED                                        $      (0.44) $      (0.35)
                                                ============  ============