Candie's, Inc. Files Its Annual Report on Form 10-K for Fiscal 1999 and Its 10-Q for the First Quarter of Fiscal 2000.

PURCHASE, N.Y.--(BUSINESS WIRE)--Sept 22, 1999--

Candie's, Inc. (Nasdaq NMS symbol: CANDE)("the Company") today announced that it has filed its annual report on Form 10-K for the year ended January 31, 1999 with the Securities and Exchange Commission, which includes restated results for the year ended January 31, 1998. In addition, the company has filed its Form 10-Q for the first quarter of fiscal 2000. The Company expects to file amended Form 10-Q's shortly for each of the first three quarters of fiscal 1999. The Company also expects to file its 10-Q for the second quarter of fiscal 2000 by approximately September 30, 1999.

1999 FISCAL YEAR OPERATING RESULTS:

For the fiscal year ended January 31, 1999, net revenues increased 28.4% to $114,696,000 from restated net revenues of $89,297,000 in the prior year. The gross profit margin declined by 1.7% to 22.9% from 24.6% in the restated results for the prior year. The decline in gross profit was primarily attributable to increased customer returns and allowances coupled with increased revenues obtained from footwear products on a private label basis that typically generate lower margins. Due to a reduction in the gross margin and higher expenses from new initiatives, operating income declined to $786,000 compared to operating income of $4,889,000 in the restated results for the prior year. Loss before income taxes was $764,000 compared to pre-tax income of $3,760,000 in the restated results for the prior year. The net loss was $641,000, or $0.04 per diluted share on 15,250,000 shares, compared to restated net income of $3,405,000, or $0.25 per diluted share on 13,788,000 shares, in the prior fiscal year.

FISCAL 2000 FIRST QUARTER RESULTS:

For the first quarter ended April 30, 1999, net revenues of $21,254,000 declined from the restated results of $23,358,000 in the prior year first quarter. The decline in net revenue was mainly caused by a reduction in the sales of Candie's women's footwear. The gross profit margin was 25.4% versus a restated gross margin of 26.8% in the prior year first quarter. The operating loss was $1,348,000 versus a restated operating income of $911,000 in the prior year first quarter. Net loss for the first quarter amounted to $1,178,000 versus restated net income of $382,000 in the prior year first quarter. The net loss per diluted share was $0.07 on 17,430,000 shares versus restated earnings per diluted share of $0.02 on 16,015,000 shares in the prior year first quarter.

RESTATEMENT:

The Company's auditors, BDO Seidman, LLP, have completed their audit of fiscal year 1999 and have re-audited fiscal year 1998. Based on these audits, the Company is restating its results for fiscal year 1998. The Company is also restating the first three quarters of fiscal year 1999. The restatements and adjustments primarily include changes in revenue recognition, and additional inventory and accounts receivable reserves.

FISCAL 1998:

Fiscal 1998 restated results reflect a reduction in net revenues from $92,892,000 to $89,297,000, a reduction in net income from $4,536,000 to $3,405,000, and a reduction in fully diluted earnings per share from $0.33 to $0.25.

FISCAL 1999:

The majority of the issues that caused the Company to restate  its first, second, and third quarter results were due to timing differences with respect to revenue recognition and inventory and accounts receivable reserves. Also contributing to the change in fiscal 1999 quarterly results was a change in the accounting for the acquisition of the shares of Michael Caruso and Company, Inc.

Separately, the Company announced that the staff of the Securities and Exchange Commission has commenced a formal investigation into the actions of the Company and others in connection with, among other things, the accounting issues that have been raised and were the subject of the investigation by the Special Committee (See 8-K filed 6/17/99).

In commenting Neil Cole, Chairman and CEO stated, "The past four months have been challenging for the Company. Our balance sheet is strong, and at April 30, 1999, the Company had tangible net worth of $25.2 million. Mr. Cole continued, that the Company has received a commitment from a new financial institution. Bank of America Commercial Corporation has agreed to continue to finance the Company's working capital requirements through October 30, 1999."

In commenting on fiscal 1999 and the first quarter of fiscal 2000, Mr. Cole stated, "Our goal during fiscal 1999 was to create a lifestyle brand for Candie's. To achieve this we started several initiatives, including establishing an apparel joint venture with Sweet Sportswear, a wholly-owned subsidiary of Azteca Productions, Inc., opening a handbag division, opening Company-owned retail stores, licensing the Candie's brand, and expanding our wholesale presence through international distribution. While we were successful in our efforts to expand our product offering and increase the awareness of the Candie's brand, the costs associated with the expansion coupled with a slowdown in the selling of Candie's women's footwear negatively impacted our operating results. We expect the second quarter of fiscal 2000 to reflect a loss, which can be attributed to the above factors, as well as special charges taken related to the accounting issues and the special committee investigation.

The Company has taken steps to reinvigorate its Candie's women's footwear business by addressing both the fashion content of our women's footwear and improving our back office operations. Specifically, we are staying current with new fashion and updating our core styles in order to meet the various needs of our generation "Y" customers. In contrast, our previous approach focused heavily on casual footwear regardless of market shifts. In addition, the Company is also shortening its lead times for delivery of its products by allocating a higher percentage of its footwear sourcing to Brazil, which should enable the Company to react to new trends faster and benefit from testing programs within its Company-owned retail stores. The initiatives that we are implementing, coupled with the positive reaction to our spring 2000 line gives us confidence that our Candie's women's business will return to recording positive growth rates in the future.

Also giving us confidence is the strong selling of our new product launches, including fragrances under license with Liz Claiborne and jeanswear through our joint venture with Azteca Productions, Inc. The strong response to both product lines demonstrates the strength of the Candie's brand. Going forward, we expect the growth from new divisions to diversify our risk so that future downtrends in one division should have less impact on the overall Company.

We are also enthusiastic about the prospects for our Bongo brand, as our acquisition of Bongo branded jeanswear and apparel products is expected to enhance Bongo's potential in footwear, handbags, and licensed products. We believe that the Bongo brand complements our Candie's brand by allowing us to reach the generation "Y" consumer shopping in mid-tier channels of distribution, Neil Cole concluded."

SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995. The statements which are not historical facts contained in this press release are forward looking statements that involve a number of known and unknown risks, uncertainties and other factors all of which are difficult or impossible to predict and many of which are beyond the control of the Company, which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward looking statements. Such factors include, but are not limited to, uncertainty regarding continued market acceptance of current products and the ability to successfully develop and market new products particularly in light of rapidly changing fashion trends, the impact of supply and manufacturing constraints or difficulties relating to the Company's dependence on foreign manufacturers, uncertainties relating to customer plans and commitments, competition, uncertainties relating to economic conditions in the markets in which the Company operates, the ability to hire and retain key personnel, the ability to obtain capital if required, the risks of litigation, the risks of uncertainty of trademark protection, Year 2000 compliance, the uncertainty of marketing and licensing the trademarks acquired during fiscal 1999 and other risks detailed below and in the Company's Securities and Exchange Commission filings, and uncertainty associated with the impact on the Company in relation to recent events discussed in the Company's Form 10-K for fiscal 1999.

The words "believe", "expect", "anticipate", "seek" and similar expressions identify forward-looking statements. Readers are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date the statement, was made. -0-

                             CANDIE'S INC.
             CONDENSED CONSILDATED STATEMENTS OF OPERATIONS
                 (000's omitted, except per share data)


                            Fiscal Year Ended      Three Months Ended
                                January 31              April 30
                             1999       1998       1999        1998
                          --------   --------    --------    --------
                                    (Restated) (unaudited) (unaudited)
                                                            (Restated)
Net revenues             $ 114,696  $  89,297   $  21,254   $  23,358
Cost of goods sold          88,427     67,314      15,846      17,109
                          --------   --------    --------    --------
Gross profit                26,269     21,983       5,408       6,249
Licensing income               373         84         390          -
                          --------   --------    --------    --------
                            26,642     22,067       5,798       6,249

Operating Expenses          25,856     17,178       7,148       5,338
                          --------   --------    --------    --------
Operating (loss) income        786      4,889      (1,348)        911

Other Expenses:
Interest expense - net       1,005      1,129         282         274
Equity loss in Joint
 Venture                       545         -          116          -
                          --------   --------    --------    --------
                             1,550      1,129         398         274
                          --------   --------    --------    --------
(Loss) Income before
 income taxes                 (764)     3,760      (1,746)        637
(Benefit) provision for
 income taxes                 (123)       355        (568)        255
                          --------   --------    --------    --------
Net (loss) income        $    (641) $   3,405   $  (1,178)  $     382

Net income per share
 - Basic                 $   (0.04) $    0.30   $   (0.07)  $    0.03
 - Diluted               $   (0.04) $    0.25   $   (0.07)  $    0.02

Weighted average no. of
 common shares
 - Basic                    15,250     11,375      17,430      13,656
 - Diluted                  15,250     13,788      17,430      16,015


Selected Balance Sheet Data           1/31/99     4/30/99
---------------------------          --------    --------
Current Assets                      $  45,216   $  43,547
Current Liabilities                 $  22,330   $  22,167
Stockholders' equity                $  51,849   $  50,845
Working Capital                     $  22,886   $  21,380
Current Ratio                          2.02:1      1.96:1