Eddie Bauer Holdings, Inc. first quarter revenues increased 10.0% to $214.0 million from $194.5 million in the first quarter last year.

Total revenues for the first quarter of 2007 included net merchandise sales of $200.0 million, shipping revenues of $8.7 million, licensing royalty revenues of $3.5 million, royalty revenues from foreign joint ventures of $1.5 million, and other revenues of $0.3 million. In the first quarter of 2006, total revenues included net merchandise sales of $180.5 million, shipping revenues of $8.2 million, licensing royalty revenues of $3.9 million, royalty revenues from foreign joint ventures of $1.7 million, and other revenues of $0.2 million.

Net merchandise sales for the first quarter of 2007 included $136.4 million of sales from the Company's retail and outlet stores and $63.6 million of sales from its direct channel, which includes sales from its catalogs and websites. This compares to $125.9 million of sales from the Company's retail and outlet stores and $54.6 million of sales from its direct channel in first quarter of fiscal 2006. Comparable store sales for the first quarter of 2007 increased by 9.5%, and sales in the Company's direct channel increased 16.3%.

Gross margin for the first quarter of 2007 was $58.6 million, an increase of $10.0 million from $48.6 million for the first quarter of 2006. Gross margin percentage for the first quarter of 2007 rose to 29.3%, up from 26.9% in the first quarter of fiscal 2006. The increase was due primarily to a decrease in occupancy costs as a percentage of net merchandise sales.

The Company reported a net loss for the first quarter of 2007 of $44.8 million, or $1.47 per diluted share, compared to a net loss of $35.6 million, or $1.19 per diluted share, in the same period in 2006. The net loss of $44.8 million in the first quarter of 2007 included non-recurring expenses totaling approximately $16.4 million including a previously announced $5 million merger termination fee and $1.4 million in legal fees and expenses related to the Company's proposed sale to an affiliate of Sun Capital Partners and Golden Gate Capital; $8.4 million of expenses, including $3.2 million of accelerated stock-based compensation expense, related to the resignation of the Company's former Chief Executive Officer; and a $1.6 million legal settlement. The net loss of $35.6 million for the first quarter of 2006 included a loss from discontinued operations of $534,000.

Income tax benefit for the first quarter of fiscal 2007 was $1.1 million compared to $3.9 million in the first quarter of 2006.

Income (loss) from continuing operations before income taxes, interest expense and depreciation and amortization expense, or EBITDA, for the first quarter of 2007 was a loss of $25.8 million, compared to a loss of $19.5 million for the first quarter of 2006. EBITDA for the first quarter of 2007 exclusive of the aforementioned non-recurring expenses was a loss of $9.4 million. 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 of loss from continuing operations before income tax benefit. In addition, the Company incurred pre-tax, non-cash stock compensation expense of $4.7 million in the first quarter of 2007, which includes the $3.2 million related to the resignation of the former Chief Executive Officer, compared to stock-based compensation expense of $3.3 million in the first quarter of 2006.

“During the first quarter, we were happy to see a continuation of the improved business trends we experienced during the fourth quarter of 2006,” said Howard Gross, Interim Chief Executive Officer of Eddie Bauer. “Customers have responded positively to our refocused merchandise assortment, which is more in line with the needs and preferences of our core customers and capitalizes on our brand's unique outdoor heritage. Our strategy is to continue to refine and enhance our product line in order to drive comparable store sales growth in both our retail and direct channels, and we are encouraged that the initial changes we have been making appear to be resonating with consumers.”

The Company further noted that, while it is pleased that first quarter EBITDA results exclusive of the non-recurring expenses are improved from last year, it must continue to make improvements to the merchandise collection and improve same store sales and sales per square foot in its retail and outlet channel and increase sales in its direct channel in order to develop a sustainable trend of improving results.

On April 4, 2007, the Company completed a refinancing of its outstanding debt, replacing its previous $274 million senior secured term loan with a new $225 million term loan and $75 million in 5.25% convertible senior notes due 2014. The new financing package provides the Company with greater financial flexibility and lower interest expense as it implements its turnaround strategy. The Company will recognize a loss on extinguishment of debt of $3.3 million in its second fiscal quarter resulting from the write-off of deferred financing fees on the previous term loan.

As of March 31, 2007, the Company operated 367 retail and outlet stores in total, consisting of 251 retail stores and 116 outlet stores. During the first quarter, the Company opened one retail store and two outlet stores and closed 29 retail stores and one outlet store.

EDDIE BAUER HOLDINGS, INC.
                    CONSOLIDATED STATEMENTS OF OPERATIONS

                                                     Three          Three
                                                  Months Ended  Months Ended
                                                   March 31,      April 1,
                                                      2007           2006
                                                   ($ in thousands, except
                                                     earnings per share)
                                                         (Unaudited)

    Net sales and other revenues                    $213,985       $194,501
    Costs of sales, including buying and occupancy   141,425        131,960
    Selling, general and administrative expenses     111,797         96,321

       Total operating expenses                      253,222        228,281
    Operating loss                                  (39,237)       (33,780)
    Interest expense                                   6,806          5,748
    Other income                                       1,571            966
    Equity in losses of foreign joint ventures       (1,424)          (396)

    Loss from continuing operations before
     income tax benefit                             (45,896)       (38,958)
    Income tax benefit                               (1,115)        (3,921)

    Loss from continuing operations                 (44,781)       (35,037)
    Loss from discontinued operations (net of
     income tax expense (benefit) of $0 and $0,
     respectively)                                         -          (534)

    Net loss                                       $(44,781)      $(35,571)

    Income (loss) per basic and diluted share:
     Loss from continuing operations per share       $(1.47)        $(1.17)
     Loss from discontinued operations per share           -         (0.02)
     Net loss per share                              $(1.47)        $(1.19)

    Weighted average shares used to compute
     income (loss) per share:
     Basic                                        30,388,582     29,991,684
     Diluted                                      30,388,582     29,991,684