Shoe Pavilion, Inc. reported net income of $146,555, or $.02 per share, for the year ended December 28, 2002 compared to net income of $1.5 million or $.21 per share, for the year ended December 29, 2001. For the fourth quarter ended December 28, 2002, the Company reported a net loss of $354,000 or ($.05) per share compared to net income of $315,000 or $.05 per share for the same period last year.

Net sales for the twelve months ended December 28, 2002 were $83.8 million, a 4.9% decrease from net sales of $88.1 million for the twelve months ended December 29, 2001. Net sales from the Company’s retail stores and Gordmans licensed shoe departments were $78.8 million and $5.0 million, respectively, for the twelve months ended December 28, 2002 compared to $73.6 million and $14.5 million, respectively, for the same period last year.

Net sales were $20.7 million for the fourth quarter ended December 28, 2002, compared to net sales of $23.9 million for the same period in 2001, a 13.4% decrease. Net sales from the Company’s retail stores and Gordmans licensed shoe departments were $20.7 million and $0.0, respectively, for the fourth quarter ended December 28, 2002 compared to $19.7 million and $4.2 million, respectively, for the same period last year.

Comparable store net sales decreased 3.7% and 1.0%, respectively, for the fourth quarter and twelve months ended December 28, 2002 from the same periods last year.

As previously announced, on June 14, 2002 the license agreement with Gordmans department stores was terminated and the Company discontinued operating all 40 of its licensed shoe departments in Gordmans department stores. The licensed shoe departments operating contribution before overhead, distribution costs, interest and taxes was approximately $.7 million and $2.9 million for the years ended December 28, 2002 and December 29, 2001, respectively.

During the quarter ended December 28, 2002 the Company opened five new stores. Since year end the Company closed one store in which the lease had expired bringing the total number of stores the Company operates to 87.

                          Shoe Pavilion, Inc.
            Condensed Consolidated Statements of Operations
                              (Unaudited)

(In thousands, except earnings per share and number of stores)

                                   Quarter ended         Year ended
                                ------------------  ------------------
                                Dec. 28,  Dec. 29,  Dec. 28,  Dec. 29,
                                   2002      2001      2002      2001
                                --------  --------  --------  --------

Net sales                       $20,675   $23,864   $83,782   $88,135
Cost of sales and related
 occupancy expenses              14,752    16,332    57,294    60,686
                                --------  --------  --------  --------
         Gross profit             5,923     7,532    26,488    27,449
Selling, general and
 administrative expenses          6,434     7,021    26,158    24,467
                                --------  --------  --------  --------
         Income (loss) from
          operations               (511)      511       330     2,982
Interest expense                    (60)      (58)     (155)     (683)
Other income (expense), net         (40)       (7)       27        57
                                --------  --------  --------  --------
Income (loss) before income
 taxes                             (611)      446       202     2,356
Income tax provision (benefit)     (257)      131        55       895
                                --------  --------  --------  --------
Net income (loss)                 ($354)     $315      $147    $1,461