Clothestime announces filing of a plan of reorganization.

ANAHEIM, Calif.--(BUSINESS WIRE)--March 21, 1997--The Clothestime Inc. (OTC:CTMEQ) Friday announced that it had filed a plan of reorganization and disclosure statement in the chapter 11 bankruptcy cases of the company and certain of its subsidiaries.

The reorganization plan and disclosure statement reflect the terms of the previously announced agreement between Clothestime and the official unsecured creditors committee in its bankruptcy case.

David A. Sejpal, Clothestime's Chairman of the Board, President and Chief Executive Officer, said: "The filing of our reorganization plan is a tremendous achievement, and represents the culmination of months of extremely hard work and sacrifice by our associates, vendors and creditors. We are delighted to be taking this first step toward Clothestime's emergence from bankruptcy with our creditors' committee fully committed to the company's reorganization." Sejpal also said that the company currently hoped to achieve Bankruptcy Court confirmation of the plan of reorganization by mid-summer.

Under the terms of the plan of reorganization filed today, Clothestime's unsecured creditors would receive initial payments totaling approximately $3.5 million. A trust to be established for the benefit of unsecured creditors would receive 75 percent of the common stock of the reorganized company, a portion of which would be subject to redemption for $4.0 million over the next four years. The remaining 25 percent of the stock of reorganized Clothestime would be distributed to the company's management. Existing stockholders would receive no distributions under the plan, and their stock would be canceled.

Clothestime also announced today the results for the fourth quarter and the year ended Jan. 25, 1997 (Fiscal 1996). Sejpal said, "Our 1996 results were disappointing, but we believe that, especially with the filing of our reorganization plan, Clothestime has an opportunity to return to profitability."

Sales for the 13 weeks of the fourth quarter of Fiscal 1996 were $45.7 million compared with $67.9 million for the same period last year. For the 52 weeks of Fiscal 1996, total sales were $195.2 million compared with $308.2 million for the previous year. A significant portion of the total sales reduction was due to the lower number of stores this year as compared with last year.

Operating loss for the quarter before reorganization charges and income taxes was $7.4 million as compared with a loss of $19.8 million for the same period last year. There was an income tax provision this quarter of $927 thousand compared with an income tax benefit of $5.8 million for the same period last year. The loss for the fourth quarter this year includes reorganization costs of $9.5 million, resulting in a net loss of $17.8 million. The loss for the fourth quarter last year included reorganization costs of $22.0 million, resulting in a net loss of $35.9 million. The loss per share was $1.26 this quarter vs. a loss of $2.53 per share for the same quarter last year.

For the 52 weeks of Fiscal 1996, the operating loss before reorganization charges and income taxes was $14.1 million as compared with a loss of $31.0 million for the same period last year. There was an income tax provision of $927 thousand this year compared with an income tax benefit of $10.0 million last year. The loss for the 52 weeks this year includes reorganization costs of $16.6 million, resulting in a net loss of $31.6 million. The loss for the 52 weeks last year included reorganization costs of $22.0 million, resulting in a net loss of $43.0 million. Loss per share was $2.23 this year as compared with a loss per share of $3.03 last year. -0-

                   CLOTHESTIME ANNOUNCES FILING
                   OF A PLAN OF REORGANIZATION
                          (continued)

                  Summary Results of Operations
            (000's Omitted, Except Per Share Amounts)

Fourth Quarter            Jan. 25, 1997         Jan. 27,1996
Net sales                  $ 45,678              $ 67,863
Loss before reorganization
 costs and income taxes    $  7,394              $ 19,776
Net loss                   $ 17,839              $ 35,905
Loss per share             $   1.26              $   2.53
Average shares
 outstanding                 14,198                14,198

Full Year                 Jan. 25, 1997         Jan. 27, 1996
Net sales                  $195,239              $308,231
Loss before reorganization
 costs and income taxes    $ 14,119              $ 31,042
Net loss                   $ 31,644              $ 43,002
Loss per share             $   2.23              $   3.03
 Average shares
  outstanding                14,198                14,190

Clothestime Stores currently operates 331 women's apparel stores in 17 states and Puerto Rico, offering primarily in-season, moderately-priced sportswear, dresses and accessories, emphasizing fashion at a discount from department and specialty stores.

CONTACT: Clothestime Inc.

Douglas L. Pereira, 714/779-5881, Ext. 2410