Big Dog Holdings Inc. Announces Record Earnings for Fourth Quarter and 1998.

SANTA BARBARA, Calif.--(BUSINESS WIRE)--Feb. 10, 1999--Big Dog Holdings Inc. (NASDAQ:BDOG) Wednesday announced that, based on a preliminary review of its results, the Company expects earnings for the 4th quarter of $0.29 per share, a 32% increase over its $0.22 per share earnings for the same period last year.

Based on such results, the Company expects earnings of $0.32 per share for the year ended Dec. 31, 1998, a 33% increase over its 1997 results of $0.24 per share. Both amounts are records for the Company. As previously announced, Big Dogs expects net total sales for 1998 of $100.5 million, a 17% increase as compared to $86.3 million in 1997.

Comparable store sales increased 0.7% for the 4th quarter and 0.6% for the year, the fourth consecutive year of comparable store sales increases.

Chief Financial Officer, Roberta Morris, said: "A number of factors contributed to our increase in earnings, including the impact of cost controls at our new distribution center and elsewhere throughout the Company and an increase in the unit profitability of our retail stores. Also, cash flow was quite strong, with Big Dogs generating over $10 million in EBITDA in 1998 and ending the year with $13 million in cash."

Annual Dividend Announcement

Big Dog Holdings also announced that its Board of Directors has approved an annual discretionary dividend to be determined by the Board each year based on the Company's year-end holiday results. The first annual dividend has been declared in the amount of $0.10 per share payable on March 4, 1999 to stockholders of record at the close of business on Feb. 22, 1999.

Andrew Feshbach, Chief Executive Officer, said: "This dividend program reflects the Company's strong cash flow. We believe we are well-capitalized to accomplish our growth plans in the coming years."

Business Outlook

Feshbach added: "We are pleased with how the year ended and with our prospects for 1999. The 4th quarter showed improvements in almost all aspects of our business, including increased gross margins, containment of operating expenses, and growth in catalog and other non-retail sales. This resulted in better than anticipated earnings for the quarter. With this momentum from last year and our strong capital base, we are well positioned for an even more successful 1999."

As previously announced, Big Dogs initiated Internet sales in late November with positive early results and intends to have a full-service Internet store operational in the second quarter of this year.

Said Feshbach: "Based on our initial success, we have begun working with various Internet providers and consultants, and have been received positively. We believe Internet sales will compliment our current channels of distribution and are confident in our ability to implement this process in a cost-effective manner.

"As a result of Big Dogs having in-house expertise in graphics and mail order operations, our Company already has in place most of the support and logistics systems required to ensure a smooth implementation of an online sales operation."

Big Dogs develops, markets and retails a branded, lifestyle collection of unique, high-quality, popular-priced consumer products, including activewear, casual sportswear, accessories and gifts. Focusing on quality, value and fun, the BIG DOGS(R) brand is designed to appeal to men, women and children of all ages, particularly baby boomers and their kids, when they are engaged in leisure or recreational activities.

In addition to its 175 retail stores, Big Dogs markets its products through other channels, including its catalog and better wholesale accounts and Internet sales.

Statements contained in this news release that are not historical information are "forward-looking statements" as defined within the Private Securities Litigation Reform Act of 1995. These include earnings and sales estimates, future dividends, implementation and success of Internet sales, and the costs and timing of such Internet sales implementation. Such forward-looking statements are subject to risks and uncertainties, that could cause actual results to differ materially from those estimated, projected or implied. In addition, prior financial performance is not necessarily indicative of the results that may be expected in the future and the Company believes that such comparison cannot be relied upon as indicators of future performance.

Additional factors that could affect the Company's operating and financial results are described in the Company's Prospectus dated Sept. 25, 1997 that is part of its registration statement on Form S-1 (file no. 333-33027) and Form 10-K for the year ended Dec. 31, 1997. The Company undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events.