Phoenix Doubles Q1 Net Sales; over 10% Organic Growth

Phoenix Footwear Group announced consolidated results for the first quarter ended March 27, 2004. Net sales for the first quarter totaled $18.6 million versus $9.2 million for the first quarter of 2003, an increase of $9.4 million or 102%. Net sales for the current period include $185,000 of royalty income compared to zero for the prior year period.

The Company's financial results for the first quarter of 2004 resulted in net income of $1.2 million, compared to $375,000 in the first quarter of 2003. Net income per diluted share was $0.24 for the first quarter. Net income per diluted share for the comparable prior year quarter was $0.10. Gross margin for the first quarter was 44%, comparable to the first quarter of 2003.

The per share amounts for the first quarter ended March 27, 2004 include the effect of the 699,980 and 71,889 shares of newly issued common stock associated with the H.S. Trask & Co. and Royal Robbins, Inc. acquisitions, respectively, which occurred during the second half of 2003.

James R. Riedman, Chairman and CEO, commented, “We are beginning to see the benefits of the investments we made in our business during the past year. Our first quarter results highlight our initial success in integrating recent acquisitions and driving sales growth across our broadened portfolio. Our utilization of a shared infrastructure and disciplined approach to cost controls and inventory management allowed us to convert this revenue gain into profits. As a result, both our operating income and net income more than tripled during the quarter, demonstrating the effectiveness of our model. We are pleased with this strong first quarter performance and remain confident in our financial performance expectations for the full 2004 year.”

Net sales for the first quarter ended March 27, 2004 increased $9.4 million or 102%, increasing to $18.6 million from $9.2 million for the first quarter of 2003. Of this increase $7.7 million is attributable to acquired brand revenue associated with the H.S. Trask(R), Ducks Unlimited(R), and Royal Robbins(R) brand acquisitions which occurred during the second half of 2003. Giving effect to these acquisitions as if they occurred on January 1, 2003, Phoenix Footwear had $1.8 million in pro forma organic net sales growth for the Company's five brands, or 10.4%, based on $16.9 million in pro forma net sales in the first quarter ended March 29, 2003. The pro forma net sales growth during the current quarter was primarily due to strong acceptance of these brands' spring product lines at retail.

Gross margin in the first quarter was 44% of net sales, comparable to the first quarter of 2003. Selling, general and administrative expenses for the first quarter of 2004 were $5.8 million or 31% of net sales, versus $2.9 million or 31% of net sales for the first quarter of 2003. The increase was primarily related to costs associated with the addition of the H.S. Trask(R), Ducks Unlimited(R) and Royal Robbins(R) product lines.

During the first quarter of 2004, interest expense amounted to $170,000, compared to $66,000 in the comparable prior year period. Included in interest expense is $40,000 related to the accelerated expensing of deferred financing costs.

                                                     Pro Forma Net Sales
                                                     for the Three Months
                                                     Ended March 29, 2003
                                                        (in thousands)
                                                          (unaudited)

    Phoenix Footwear Group, Inc. (Actual)                     $ 9,207
    Acquired Brands (H.S. Trask & Co., Royal Robbins, Inc.)     7,678
    Total Net Sales                                           $16,885


                       Phoenix Footwear Group, Inc.
              Consolidated Condensed Statement of Operations

                          For the Quarter Ended
                               (Unaudited)

                                March 27,             March 29,
                                  2004                  2003

  Net sales                   $18,638,000  100%      $9,207,000   100%
  Cost of goods sold           10,492,000   56%       5,187,000    56%

  Gross profit                  8,146,000   44%       4,020,000    44%

  Operating expenses:
    Selling and administrative
     expenses                   5,811,000   31%       2,853,000    31%
    Other expense, net             34,000    0%         476,000     5%
      Total operating expenses  5,845,000   31%       3,329,000    36%

  Income from operations        2,301,000   12%         691,000     8%

  Interest expense                170,000                66,000

  Income before income taxes    2,131,000   11%         625,000     7%

  Income tax provisions           895,000               250,000

  Net Income                   $1,236,000    7%        $375,000     4%

  Earnings per common share:

  Basic                             $0.27                 $0.10
  Diluted                           $0.24                 $0.10

  Weighted-average shares
   outstanding:

  Basic                         4,533,466             3,666,188
  Diluted                       5,108,598             3,863,136