Shoe Pavilion Swings to Profit in Q4 on 14.7% Comp Sales Gain

Shoe Pavilion, Inc. reported net income of $1.0 million, or 14 cents per fully diluted share, for the fourth quarter ended January 1, 2005, compared to a net loss of $60,000, a loss of a penny per share, on a restated basis for the year-ago period, which included a before tax charge of approximately $1.0 million for costs associated with the settlement of a wage and hour lawsuit.

For the 52 week fiscal year ended January 1, 2005, the Company reported net income of $2.1 million or $0.30 per fully diluted share compared to a net loss of $2.9 million or ($.43) per share on a restated basis for the 53 week fiscal year ended January 3, 2004.

Net sales increased 11.5 % to $24.8 million for the thirteen week fourth quarter ended January 1, 2005, compared to net sales of $22.2 million for the fourteen week fourth quarter ended January 3, 2004.

Net sales for the fiscal year ended January 3, 2004 included $1.5 million in sales related to the additional week in the fourth quarter.

Net sales for the 52 week fiscal year ended January 1, 2005 increased 2.6% to $85.8 million compared to net sales of $83.6 million for the 53 week fiscal year ended January 3, 2004. Net sales for the fiscal year ended January 3, 2004 included $1.5 million in sales related to the additional week in the fourth quarter. Comparable store net sales for the 52 week period ended January 1, 2005 increased 3.9%.

Mr. Dmitry Beinus, Chairman and CEO, stated “I am very pleased with our operating results for the year. We achieved both an increase in comparable store sales as well as improvement in our gross margin. We are particularly proud of our fourth quarter results in which our comparable store sales increased 14.7%. In 2004 we were able to successfully identify the appropriate inventory items to satisfy our customer's demands. During the next eighteen months the Company plans to open between 15 to 20 stores.”

The Company reported in a Form 8-K, filed with the Securities and Exchange Commission on March 3, 2005 that it had reviewed its lease accounting practices as a result of a recent interpretation issued by the Chief Accountant of the SEC. In the filing the Company announced that it intended to change its lease accounting treatment and would restate certain historical financial statements. The Company will restate its prior year financial statements in its annual report on Form 10-K for the year ended January 1, 2005. For Fiscal years 2003 and 2002 the Company will record a charge, net of taxes, of $204,000 or $0.03 per share and $175,000 or $0.02 per share, respectively. The resulting adjustments will not affect historical or future cash flows. All financial data in this press release that is affected by the changes in the Company's lease accounting practices has been restated as applicable.

During the quarter ended January 1, 2005 the Company opened two stores. Since the end of the fourth quarter the Company closed two stores bringing the total number of stores the Company operates to 84.

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

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

                           13-Weeks   14-Weeks   52-Weeks   53-Weeks
                             ended      ended      ended      ended
                           January 1, January 3, January 1, January 3,
                              2005       2004       2005       2004
                           ---------- ---------- ---------- ----------
                                      (Restated)            (Restated)

Net sales                    $24,796    $22,240    $85,770    $83,566
Cost of sales and related
 occupancy expenses           15,552     14,850     55,831     59,870
                           ---------- ---------- ---------- ----------
 Gross profit                  9,244      7,390     29,939     23,696
Selling, general and
 administrative expenses       7,515      7,443     26,195     28,321
                           ---------- ---------- ---------- ----------
 Income (loss) from
  operations                   1,729        (53)     3,744     (4,625)
Interest expense                (117)       (75)      (361)      (290)
Other income, net                  1          0         11          0
                           ---------- ---------- ---------- ----------
Income (loss) before
 income taxes                  1,613       (128)     3,394     (4,915)
Income tax benefit
 (expense)                      (622)        68     (1,333)     1,983
                           ---------- ---------- ---------- ----------
Net income (loss)               $991       ($60)    $2,061    ($2,932)
                           ========== ========== ========== ==========

Earnings (loss) per share:
Basic                          $0.15     ($0.01)     $0.30     ($0.43)
Diluted                        $0.14     ($0.01)     $0.30     ($0.43)