Shoe Pavilion, Inc. repoprted net sales increased 28.0% to $31.8 million from $24.8 million for the third quarter last year. Comparable store net sales for the third quarter increased 3.7% from the same period in fiscal 2005. Sales from the company's new and relocated stores contributed $8.3 million in the third quarter.

The company incurred a net loss of $318,000, or a net loss of 3 cents per diluted share, in the third quarter ended September 30, 2006 compared to net income of $293,000, or 4 cents per diluted share, in the third quarter of 2005.

During the quarter, the company opened seven new stores and closed two stores for which the leases had expired, bringing the total number of stores that operated as of September 30, 2006 to 100 stores.

Bruce Ross, Executive Vice President and Chief Financial Officer, stated, “Our results for the quarter were consistent with the high end of our net loss estimates. As we reported in our preliminary earnings announcement, we experienced soft comparable store and new store sales due to unseasonably warm weather in the states in which we operate, leading to a slow start to sales of fall merchandise. Although we generated top line growth of 28%, our operating margins were reduced due to the increased number of newly opened stores as a percentage of our total store base.”


Business Outlook

In the fourth quarter to date, the company have opened four stores and closed one store. The newly opened stores are in West Los Angeles, Irvine and Rocklin, California, and Arlington, Texas. The store that closed was in Tustin, California. The company plans to open an additional five stores in the fourth quarter and will end the year with 108 stores.

The company anticipates that comparable store sales will increase between 3% to 5% in the fourth quarter. With nine new stores opening in the fourth quarter, the company anticipates achieving net sales for the quarter of $38 million to $41 million, an increase of 29% to 39% over net sales in the fourth quarter of 2005. Fourth quarter diluted earnings per share are expected to be in the range of 6 cents to 10 cents.