Shoe Pavilion Posts Q1 Loss As Comps Decline 8.8%

Shoe Pavilion, Inc. announced a net loss of $1.3 million or ($0.19) per share, for the first quarter ended March 29, 2003 compared to net income of $77,000 or $0.01 per share, for the first quarter of 2002.

Net sales were $18.6 million for the first quarter ended March 29, 2003, compared to net sales of $21.4 million for the same period in 2002, a 13.2% decrease. Net sales from the Company’s retail stores and Gordmans licensed shoe departments were $18.6 million and $0.0, respectively, for the first quarter ended March 29, 2003 compared to $18.7 million and $2.7 million, respectively, for the same period last year. Comparable store net sales decreased 8.8 % for the first quarter ended March 29, 2003 from the same period 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.

Gross profit as a percentage of net sales decreased to 22.8% for the quarter ended March 29, 2003 from 30.9% for the same period in 2002. This decrease in gross profit as a percentage of net sales was primarily due to the increase in occupancy costs as a percentage of net sales and higher markdowns taken. The increase in occupancy costs as a percentage of net sales was in part due to the decrease in comparable store net sales and higher occupancy costs as a percentage of net sales for the nine new stores opened in 2003 and 2002.

Selling, general and administrative expenses decreased 1.2% to $6.4 million for the quarter ended March 29, 2003 from $6.5 million for the same period last year.

On April 18, 2003 the Company entered into a Loan Agreement with Wells Fargo Retail Finance, LLC. The agreement provides for a revolving line of credit in an amount up to $20.0 million with a maturity date of April 18, 2006.

The Agreement replaces the Company’s previous credit agreement with Wells Fargo Bank, National Association.

During the quarter ended March 29, 2003 the Company closed one store in which the lease had expired. Since the end of the quarter the Company opened two new stores and currently operates 89 stores.

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

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

                                                     Quarter Ended
                                                 March 29,   March 30,
                                                   2003        2002

Net sales                                         $18,583     $21,415
Cost of sales and related occupancy expenses       14,346      14,807
                                                 ---------   ---------
      Gross profit                                  4,237       6,608
Selling, general and administrative expenses        6,374       6,454
                                                 ---------   ---------
      Income (loss) from operations                (2,137)        154
Interest expense                                      (60)        (35)
Other income, net                                       -           6
                                                 ---------   ---------
Income (loss) before taxes                         (2,197)        125
Income tax provision (benefit)                       (879)         48
                                                 ---------   ---------
Net income (loss)                                 ($1,318)        $77