Shoe Pavilion, Inc. reported a 28.1% increase in net sales for the third quarter to $31.8 million from $24.8 million for the same period last year. Comparable store net sales for the third quarter increased 3.7%, while sales from new stores and relocated stores in the third quarter contributed $8.3 million.

For the third quarter, the company is expecting a net loss in the range of $100,000 to $300,000, or 1 cents to 3 cents per diluted share, compared to net income of $293,000, or 4 cents per diluted share last year.

Dmitry Beinus, chairman and CEO of the company, stated, “Our performance for the third quarter was not in line with our expectations since comparable store sales, while good, came in below our expectations, and total net sales were lower than expected, particularly in the month of September. The quarter was also impacted by pre-opening expenses related to the opening of seven new stores in the quarter, three of which were in the last two weeks of the quarter. We remain on track to open 20 to 22 stores in fiscal 2006.”

During the quarter ended September 30, 2006, the company opened seven new stores and closed two stores in which the leases had expired, bringing the total number of stores the company operates to 101. The company opened four stores in July, located in Redwood City, California, Portland, Oregon, Santa Fe, New Mexico and El Paso, Texas and opened three stores in September in Texas, in the cities of San Marcos, Hurst and Ft. Worth. The stores closed were small stores in Polk, California and Portland, Oregon. We expect to open six to eight additional new stores in fiscal 2006.