Shoe Pavilion Makes Big Q3 Income Gains Off Small Base

Shoe Pavilion, Inc. announced net income of $293,000 or 4 cents per diluted share, for the third quarter ended October 1, 2005 compared to net income of $24,000 or 0 cents per diluted share, for the third quarter of 2004. Net income for the nine months ended October 1, 2005 was $1.4 million or 20 cents per diluted share, compared to net income of $1.1 million or 16 cents per diluted share, for the same period in 2004.

As previously announced, comparable store net sales increased 7.8% for the third quarter ended October 1, 2005 from the same period last year. Net sales for the third quarter ended October 1, 2005 increased 20.1% to $24.8 million from $20.7 million for the same period last year.

Comparable store net sales for the nine months ended October 1, 2005 increased 9.0% from the same period last year. Net sales for the nine months ended October 1, 2005 increased 19.8% to $73.0 million from $61.0 million for the same period last year.

Gross profit for the third quarter of 2005 was $8.4 million or 33.8% of net sales compared to $6.7 million or 32.5% of net sales for the same period last year. Gross profit for the nine months ended October 1, 2005 was $25.2 million or 34.5% of net sales compared to $20.7 million or 33.9% of net sales for the same period last year.

Selling, general, and administrative expenses for the third quarter of 2005 were $7.8 million or 31.3% of net sales compared to $6.6 million or 31.9% of net sales for the same period last year. Selling, general, and administrative expenses for the nine months ended October 1, 2005 were $22.5 million or 30.9% of net sales compared to $18.7 million or 30.6% of net sales for the same period last year.

Approximately $400,000 of the increase in selling, general and administrative expenses for the third quarter ended October 1, 2005 relates to the direct operating expenses of the 14 stores opened from July 2004 through October 1, 2005, net of eight closed, and increases in administrative payroll costs, freight costs and worker's compensation insurance. Selling, general, and administrative expenses for the third quarter of 2004 were favorably impacted by a $258,000 reversal of a reserve during the thirteen weeks ended October 2, 2004 for costs associated with the settlement of a wage and hour lawsuit.

During the quarter ended October 1, 2005, the company opened four new stores and closed two stores in which the leases had expired bringing the total stores the company operated at the end of the quarter to 89. Three of the new stores are located in Nevada. As part of its plan to operate larger stores, the company relocated one of its stores in California from a 4,500 square foot location to a new better-situated 19,000 square foot location within the same mall.

Subsequent to the end of the third quarter, the company opened a new 23,000 square foot store in California to replace a 7,000 square foot store it closed during the third quarter bringing to 90 stores currently. The company also relocated one of its stores in Washington from a 5,000 square foot location to a new better-situated 18,000 square foot location within the same mall.

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

(In thousands, except per share amounts and number of stores)
                              Thirteen weeks       Thirty-nine weeks
                                   ended                 ended
                           --------------------- ---------------------

                           October 1, October 2, October 1, October 2,
                             2005       2004       2005       2004

Net sales                    $24,820    $20,672    $73,048    $60,974
Cost of sales and related
 occupancy expenses           16,432     13,948     47,821     40,279
                           ---------- ---------- ---------- ----------
  Gross profit                 8,388      6,724     25,227     20,695
Selling, general and
 administrative expenses       7,762      6,591     22,539     18,680
                           ---------- ---------- ---------- ----------
  Income from operations         626        133      2,688      2,015
Interest expense                (145)      (102)      (381)      (244)
Other income                       1         10          1         10
                           ---------- ---------- ---------- ----------
Income  before income
 taxes                           482         41      2,308      1,781
Income tax expense              (189)       (17)      (905)      (711)
                           ---------- ---------- ---------- ----------
Net income                   $   293    $    24    $ 1,403    $ 1,070
                           ========== ========== ========== ==========

Earnings  per share:
Basic                        $  0.04    $  0.00    $  0.21    $  0.16
Diluted                      $  0.04    $  0.00    $  0.20    $  0.16

Weighted average shares
 outstanding:
Basic                          6,807      6,800      6,804      6,800
Diluted                        7,079      6,966      7,080      6,886


Stores operated at end of
 period                                                 89         84