The Walking Co. Provides Gains for Big Dog Holdings

Big Dog Holdings, Inc. reported that consolidated net income increased to $4.1 million, or 43 cents per share for the quarter ended December 31, compared to $2.9 million, or 35 cents per share, earned for the fourth quarter 2003. For the year, consolidated net income was $3.7 million, or 40 cents per share, compared to $2.6 million, 32 cents per share in 2003.
The results for the quarter and year include assets and operations of The Walking Company which business was acquired on March 3, 2004.

Merchandise margins for 2004 were 54.9%, as compared 56.6% for 2003. (The Big Dog chain margin increased to 56.8% as compared to 56.6% last year. TWC chain gross margin was 51.9% for the ten months ended December 31, 2004.) Consolidated operating expenses were 50.8% of sales for the year 2004, as compared to 52.3% for 2003. The decrease in operating expenses as a percentage of sales is primarily a result of the operating leverage associated with the TWC chain.

Consolidated net sales for the fourth quarter were $55.7 million, a 61% increase as compared to $34.7 million in the same quarter of 2003. Our consolidated net sales increased primarily due to the addition of approximately $23.4 million of revenue from our TWC operations. The Company had a total of 262 stores opened (188 Big Dog stores and 74 Walking Company stores) at the end of the period, as compared with 203 Big Dog stores on December 31, 2003. Comparable retail store sales increased 6.3% for the quarter (2.9% decline for the Big Dogs chain and 21.2% increase for the TWC chain.)

Consolidated net sales for the year ended December 31, 2004, (which included 10 months for TWC) were $161.4 million, a 56% increase, as compared to $103.8 million in 2003. Comparable retail store sales increased 3.4% for the year (1.9% decline for the Big Dogs chain and 12.7% increase for the TWC chain.)

Commenting on the 2004 results and looking towards 2005, CEO Andrew Feshbach stated, “We are very pleased with the financial, organizational and strategic progress our Company has made this last year. Notably, our ability to acquire TWC and successfully integrate it into our infrastructure has been instrumental in improving our operations and financial strength. The Company is poised for a successful year and we are hopeful to achieve increases in comparative store sales, operational efficiencies and TWC store unit growth. So far in 2005, our TWC sales momentum continues to be strong. Our Big Dogs business continues with the same pace as we've previously experienced. First quarter sales performance for 2005, while impacted by severe weather conditions around the country, has similar trends to our last quarter of 2004 for both chains.

               BIG DOG HOLDINGS, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF OPERATIONS

                       Three Months Ended              Years Ended
                            December 31,               December 31,
                        2004          2003         2004           2003
                    ------------  ------------  ------------  ------------
                     (Unaudited)   (Unaudited)

NET SALES           $ 55,739,000  $ 34,708,000  $161,358,000  $103,757,000
COST OF GOODS SOLD    24,799,000    15,126,000    72,733,000    45,025,000
                    ------------  ------------  ------------  ------------
GROSS PROFIT          30,940,000    19,582,000    88,625,000    58,732,000
                    ------------  ------------  ------------  ------------
OPERATING EXPENSES:
  Selling,
   marketing and
   distribution       21,585,000    13,505,000    73,956,000    49,089,000
  General and
   administrative      2,516,000     1,476,000     8,060,000     5,199,000
                    ------------  ------------  ------------  ------------
    Total operating
     expenses         24,101,000    14,981,000    82,016,000    54,288,000
                    ------------  ------------  ------------  ------------
INCOME FROM
 OPERATIONS            6,839,000     4,601,000     6,609,000     4,444,000
OTHER INCOME                   -             -        82,000             -
INTEREST EXPENSE,
 NET                    (237,000)      (79,000)     (831,000)     (318,000)
                    ------------  ------------  ------------  ------------
INCOME BEFORE
 PROVISION FOR
 INCOME TAXES          6,602,000     4,522,000     5,860,000     4,126,000
                    ------------  ------------  ------------  ------------
PROVISION FOR
 INCOME TAXES          2,453,000     1,640,000     2,172,000     1,489,000
                    ------------  ------------  ------------  ------------
NET INCOME          $  4,149,000  $  2,882,000  $  3,688,000  $  2,637,000
                    ============  ============  ============  ============
NET INCOME PER SHARE
  BASIC             $       0.45  $       0.35  $       0.42  $       0.32
                    ============  ============  ============  ============
  DILUTED           $       0.43  $       0.35  $       0.40  $       0.32