The Walking Company Holdings, Inc. reported consolidated net sales increased 0.3% for the second quarter to $56.0 million from $55.9 million last year. The company had a total of 295 stores opened (201 TWC stores and 94 Big Dogs stores) at the end of the period, as compared with 302 stores opened on June 30, 2007 (160 TWC stores and 142 Big Dogs stores). Consolidated comparable store sales decreased 1.2% for the second quarter 2008 with The Walking Company posting a 3.2% decline as Big Dogs reported a 4.0% increase.


Total consolidated gross profit was 51.0% of sales or $28.6 million in the second quarter 2008, as compared with 54.6% of net sales or $30.5 million in the second quarter 2007. TWC’s margin contribution decreased to 51.7% as compared to last year’s margin contribution of 52.4%. TWC product margin remained constant to last year however the overall margin decreased as a result of liquidating certain inventory items. Big Dogs margin contribution for the period decreased to 49.1% as compared to last year’s margin contribution of 59.5%. Big Dogs margin decline is the result of increased promotional activity resulting in higher sales.

Consolidated operating expenses in the second quarter 2008 were $30.9 million or 55.1% of sales, compared to $29.7 million or 53.1% in the second quarter 2007.


Consolidated operating loss for the second quarter 2008 was $2.3 million, compared to operating income of $828,000 for the second quarter 2007. The decrease in operating income is largely attributable to the closures of Big Dogs stores, a $2.9 million reduction in TWC sales ($1.0 million attributable to a decline in TWC comparative store sales revenue, and $1.9 million to a store retrofitting program), and operating lag resulting from our newly opened TWC store openings. As a result, the consolidated fully diluted net loss per share for the second quarter 2008 increased to 23 cents net loss per share, as compared with 2 cents net loss per share for the second quarter 2007.

 
           THE WALKING COMPANY HOLDINGS, INC. AND SUBSIDIARIES

                  CONSOLIDATED STATEMENTS OF OPERATIONS

                                (Unaudited)


                         Three Months Ended          Six Months Ended

                               June 30,                  June 30,

                      ————————  ————————–

                          2008         2007         2008          2007

                      ———–  ———–  ————  ————


NET SALES             $56,020,000  $55,854,000  $102,398,000  $100,078,000

COST OF GOODS SOLD     27,442,000   25,356,000    50,484,000    46,281,000

                      ———–  ———–  ————  ————

GROSS PROFIT           28,578,000   30,498,000    51,914,000    53,797,000

                      ———–  ———–  ————  ————

OPERATING EXPENSES:

   Selling, marketing

    and distribution   26,370,000   25,578,000    52,236,000    50,916,000

   General and

    administrative      1,975,000    2,419,000     4,004,000     4,474,000

   Depreciation and

    amortization        2,511,000    1,673,000     4,579,000     3,488,000

                      ———–  ———–  ————  ————

      Total operating

       expenses        30,856,000   29,670,000    60,819,000    58,878,000

                      ———–  ———–  ————  ————

LOSS FROM OPERATIONS   (2,278,000)     828,000    (8,905,000)   (5,081,000)

INTEREST INCOME                 –        3,000         2,000         6,000

INTEREST EXPENSE       (1,075,000)  (1,132,000)   (2,106,000)   (1,838,000)

                      ———–  ———–  ————  ————

LOSS BEFORE BENEFIT

 FROM INCOME TAXES     (3,353,000)    (301,000)  (11,009,000)   (6,913,000)

BENEFIT FROM INCOME

 TAXES                 (1,175,000)    (113,000)   (3,855,000)   (2,590,000)

                      ———–  ———–  ————  ————

NET LOSS              $(2,178,000) $  (188,000) $ (7,154,000) $ (4,323,000)

                      ===========  ===========  ============  ============

NET LOSS PER SHARE

   BASIC              $     (0.23) $     (0.02) $      (0.75) $      (0.46)

                      ===========  ===========  ============  ============

   DILUTED            $     (0.23) $     (0.02) $      (0.75) $      (0.46)

                      ===========  ===========  ============  ============


WEIGHTED AVERAGE SHARES

 OUTSTANDING:


   BASIC                9,518,000    9,415,000     9,499,000     9,375,000

                      ===========  ===========  ============  ============

   DILUTED              9,518,000    9,415,000     9,499,000     9,375,000

                      ===========  ===========  ============  ============