Catherines Stores Corporation reports second quarter operating results.

MEMPHIS, Tenn.--(BUSINESS WIRE)--Aug. 22, 1996--Catherines Stores Corporation (NASDAQ: CATH) reported today that net income for the second quarter of fiscal 1996 decreased to $1.7 million from $2.6 million in the prior year.

Earnings year to date decreased to $3.9 million from $4.9 million. Earnings per share were $0.22 for the second quarter compared to $0.34 in the second quarter of 1995, the highest quarter reported by the Company since its initial public offering.

Sales for the second quarter were $68.8 million, a 0.1% decrease over the second quarter 1995 sales of $69.0 million. Comparable stores' sales decreased 5.2% for the second quarter of 1996. Sales year to date increased to $139.3 million from $136.8 million, a 1.8% increase over the same period in 1995. Year to date 1996 comparable stores' sales decreased 3.2%

During the quarter, the Company opened three new stores and closed two unprofitable stores. Four additional new stores opened in early August.

Bernard J. Wein, president and chief executive officer, commenting on the results of operations, stated, "The Company's sales performance continues to be affected by price deflation in our average unit price and a very selective consumer. However, our merchandise margin as a percentage of sales increased by 0.5% over last year. This can be directly attributed to a reduction in markdowns due to fewer clearance goods in our stores. This increase in merchandise margin combined with our continued emphasis on expense reduction, especially in advertising and payroll costs, helped us to partially offset the continued slump in the retail apparel market reflected in our sales. Our current plan is to open 6 additional stores during our fall season. We continue to evaluate all areas of our business to identify opportunities for growth and efficiency."

Catherines Stores Corporation is a Memphis based specialty retailer selling large-size women's apparel in 456 stores in 40 states operating under the names Catherine's; PS... Plus Sizes, Plus Savings; Added Dimensions; and The Answer. -0-

            Catherines Stores Corporation and Subsidiaries
                  Consolidated Statements of Income
            (amounts in thousands except per share data)
                            Unaudited

                                    Twenty-six Weeks Ended
                              August 3, 1996         July 29, 1995

Net sales                    $139,297   100.0%    $136,822   $100.0%
Cost of sales, including
 buying and occupancy
 costs                         94,670    68.0%      92,107     67.3%
Gross margin                   44,627    32.0%      44,715     32.7%
Selling, general and
 administrative expenses       36,877    26.5%      35,441     25.9%
Amortization of
 intangible assets                601     0.4%         604      0.4%
Operating income                7,149     5.1%       8,670      6.3%
Interest and other, net           557     0.4%         427      0.3%
Income before income taxes      6,592     4.7%       8,243      6.0%
Provision for income taxes
 (as a percentage of income
  before taxes)                 2,702    41.0%       3,297     40.0%
Net income                   $  3,890     2.8%     $ 4,946      3.6%
Net income per common share  $   0.50              $  0.63
Weighted average number of
 common shares outstanding      7,852                7,840

                                      Thirteen Weeks Ended
                              August 3, 1996         July 29, 1995

Net sales                    $ 68,833   100.0%    $ 68,964   $100.0%
Cost of sales, including
 buying and occupancy
 costs                         47,176    68.5%      46,317     67.2%
Gross margin                   21,657    31.5%      22,647     32.8%
Selling, general and
 administrative expenses       18,108    26.3%      17,723     25.7%
Amortization of
 intangible assets                300     0.4%         302      0.4%
Operating income                3,249     4.7%       4,622      6.7%
Interest and other, net           266     0.4%         243      0.4%
Income before income taxes      2,983     4.3%       4,379      6.3%
Provision for income taxes
 (as a percentage of income
  before taxes)                 1,247    41.8%       1,735     39.6%
Net income                   $  1,736     2.5%     $ 2,644      3.8%
Net income per common share  $   0.22              $  0.34
Weighted average number of
 common shares outstanding      7,870                7,878

                        Consolidated Balance Sheets
                           (amounts in thousands)
                                 Unaudited
                                         Aug. 3,   Feb. 3,  July 29,
                                          1996      1996      1995
Assets
 Cash and cash equivalents              $  2,740  $  3,955  $  3,248
 Receivables                               3,281     3,781     4,732
 Merchandise inventory                    52,639    50,078    50,201
 Other current assets                      5,166     4,499     4,418
 Property and equipment, net              35,252    31,397    30,637
 Other assets and deferred charges, net    3,052     3,300     3,336
 Goodwill, net                            24,092    24,450    25,080
 Total assets                           $127,714  $121,460  $121,652

Liabilities and stockholders' equity
 Accounts payable and other
  current liabilities                   $ 40,422  $ 41,101  $ 38,094
 Long-term bank debt                       7,250     6,000     5,750
 Other long-term liabilities               2,337     2,127     3,836
 Stockholders' equity                     76,213    72,232    73,972
 Total liabilities and
  stockholders' equity                  $127,714  $121,460  $121,652-0-

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CONTACT: Catherines Stores Corp., Memphis

David C. Forell, 901/363-3900, ext. 1271