Big Dog Holdings Inc. Announces Record Second-Quarter 2000 Results, $.09 vs. $.06, and Announces $6.25 per Share Cash Tender Offer for 3.5 Million Shares.

Business Editors & Retail Writers

SANTA BARBARA, Calif.--(BUSINESS WIRE)--July 31, 2000

Big Dog Holdings Inc. (Nasdaq:BDOG) (www.bigdogs.com), a developer, marketer and retailer of branded, lifestyle consumer products, today reported the financial results for the second quarter ended June 30, 2000.

Financial Results

For the quarter ended June 30, 2000, net income increased 41% to a second-quarter record of $1,038,000, as compared with $734,000 for the second quarter 1999. Earnings per share increased 50% to $.09, as compared with $.06 for the same period last year.

Net sales increased to $26,205,000 as compared with $24,093,000 in the second quarter 1999. The increase in net income is attributable to improvement in operating efficiencies and increased revenue, partially offset by a small decrease in gross margin.

At the close of the quarter, the company had 199 retail stores, representing a net increase of 18 stores since June 30, 1999. Notably, the company's comparable stores sales growth was 2.1% for the second quarter.

Commenting on the results, CEO Andrew Feshbach stated: "Overall, we are very pleased with our second-quarter results. Our business is running smoothly. We believe we are in a strong position with our fall merchandise and look forward to the second half of the year, which has always been the strongest and most profitable for our company."

$22 Million Cash Tender Offer for 3.5 Million Shares at $6.25 Per Share

Today, the company launched a cash tender offer to purchase 3.5 million shares of Big Dogs' common stock (approximately 30% of the outstanding shares) at $6.25 per share, representing approximately a 35% premium to the July 28 closing price. The terms of the tender offer, which is expected to close and fund in approximately one month's time, will be described in the offering materials that will be mailed to stockholders later this week. If more than 3.5 million shares are tendered, there will be a proration of the tendered shares.

Big Dogs will finance the tender offer through available cash and a new $30 million revolving line of credit led by Bank of America, which will also act as Big Dogs' primary lender. Israel Discount Bank, Big Dogs' historical lender, and Santa Barbara Bank and Trust, a leading California Central Coast lender, are also participating.

Commenting on the tender offer, Feshbach stated: "Over the past year, the company has considered various strategic and financial alternatives to enhance stockholder value. Our board and its advisers concluded that this tender offer is the best approach for providing liquidity to those stockholders who desire to sell, while also providing long-term potential for all stockholders."

The company will be holding a conference call on Wednesday, Aug. 2, 2000. Call 805/963-8727, extension 1630 for more information.

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. The BIG DOGS brand image is one of quality, fun and a sense of humor.

The BIG DOGS brand is designed to appeal to people of all ages and demographics, particularly baby boomers and their kids, big and tall customers, and pet owners. In addition to its 198 retail stores, Big Dogs markets its products through its catalog, better wholesale accounts and Internet sales.

Safe Harbor Statement Under the Private Securities Litigation Reform Act 1995: With the exception of historical information, the matters discussed in this news release are forward-looking statements that involve a number of risks and uncertainties. The actual future results of the company could differ significantly from those statements. Further information on the company's risk factors is contained in the company's filings with the Securities and Exchange Commission.

                 BIG DOG HOLDINGS INC. AND SUBSIDIARY
                CONSOLIDATED BALANCE SHEETS (Unaudited)

                                                June 30,
                                        2000                 1999

ASSETS
CURRENT ASSETS:
 Cash and cash equivalents          $ 4,322,000          $ 2,622,000
 Account receivable, net              1,123,000              829,000
 Inventories                         29,879,000           25,879,000
 Prepaid expenses and other
  current assets                      1,851,000            1,392,000
 Deferred income taxes                1,684,000            1,788,000
    Total current assets             38,859,000           32,510,000
PROPERTY AND EQUIPMENT, Net          11,032,000           13,978,000
INTANGIBLE ASSETS, Net                  143,000               27,000
OTHER ASSETS                          3,485,000              547,000
TOTAL                               $53,519,000          $47,062,000

LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
 Accounts payable                   $ 5,806,000          $ 4,071,000
 Income taxes payable                     7,000              144,000
 Accrued expenses and other
  current liabilities                 2,294,000            2,008,000
    Total current liabilities         8,107,000            6,223,000
DEFERRED RENT                           887,000              810,000
DEFERRED GAIN ON SALE-LEASEBACK         485,000                   --
    Total liabilities                 9,479,000            7,033,000
STOCKHOLDERS' EQUITY                 44,040,000           40,029,000
      TOTAL                         $53,519,000          $47,062,000


                 BIG DOG HOLDINGS INC. AND SUBSIDIARY
           CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

                       Three Months Ended        Six Months Ended
                            June 30,                  June 30,
                        2000        1999         2000         1999

NET SALES           $26,205,000 $24,093,000  $42,791,000  $40,836,000
COST OF GOODS SOLD   10,682,000   9,533,000   18,112,000   17,389,000
GROSS PROFIT         15,523,000  14,560,000   24,679,000   23,447,000
OPERATING EXPENSES:
 Selling, marketing
  and distribution   12,537,000  12,107,000   24,323,000   23,430,000
 General and
  administrative      1,342,000   1,249,000    2,671,000    2,464,000
   Total operating
    expenses         13,879,000  13,356,000   26,994,000   25,894,000
INCOME (LOSS) FROM
 OPERATIONS           1,644,000   1,204,000   (2,315,000)  (2,447,000)
INTEREST INCOME, NET    (44,000)         --     (215,000)     (94,000)
INCOME (LOSS) BEFORE
 PROVISION (BENEFIT)
 FOR INCOME TAXES     1,688,000   1,204,000   (2,100,000)  (2,353,000)
PROVISION (BENEFIT)
 FOR INCOME TAXES       650,000     470,000     (808,000)    (917,000)
NET INCOME (LOSS)   $ 1,038,000 $   734,000  $(1,292,000) $(1,436,000)
NET INCOME (LOSS)
 PER SHARE
  BASIC AND DILUTED $      0.09 $      0.06  $     (0.11) $     (0.12)

WEIGHTED AVERAGE SHARES
 OUTSTANDING:
  BASIC              11,986,000  12,029,000   11,986,000   12,064,000
  DILUTED            12,070,000  12,160,000   11,986,000   12,064,000