Cosmetic Group U.S.A. Inc. announces revenues continue to increase in third quarter.

LOS ANGELES--(BUSINESS WIRE)--Oct. 30, 1996--Cosmetic Group U.S.A. Inc. (NASDAQ:CUSA) reported that revenues increased to $3.9 million in the three months ended Sept. 30, 1996, an increase of 35 percent from the third quarter of 1995.

The company also reported net income for the 1996 quarter of $26,000 (1 cent per share) compared with a loss of $434,000 (10 cents per share) for the same quarter last year. The company noted that the profit for the September 1996 quarter was after a charge of $240,000 for the settlement of litigation that was filed in March 1996; without the effect of this charge net income would have been $266,000 for the three months ended Sept. 30, 1996.

For the nine months ended Sept. 30, 1996 revenues were $10.7 million and net income amounted to $189,000 -- 4 cents per share, compared with revenues of $5.8 million and a net loss of $1,530,000 (38 cents per share) for the first nine months of 1995. Without the charge for the settlement of litigation, net income would have been $429,000 for the nine months ended Sept. 30, 1996.

Alfred E. Booth, chief executive officer stated: "We have now reported profits for three consecutive quarters. We were able to do this despite the charge incurred in the third quarter of 1996 for the settlement of litigation. We are encouraged by the continuing success of our Zegarelli hair care line and the ability of our contract packaging business to attract new customers. The distribution of the Zegarelli line is being expanded to new areas and we will be expending a significant effort introducing the product line in new markets.

"I believe that we have already demonstrated that the Zegarelli line of products will be a significant contributor to our company's revenues and profits. Revenues for the Zegarelli products were $2.6 million for the first nine months of 1996 from $.8 million for the same period of 1995 and its place in the professional hair care industry should continue to improve."

Booth further stated: "The revenue growth in our contract packaging business which we experienced in the latter part of 1995 also continued in the third quarter. For the nine months ended Sept. 30, 1996, revenues of this segment of our business was more than 1 1/2 times that of the first nine months of 1995. We have added a number of important new customers and are confident that contract packaging revenues should continue to improve."

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995; Statements in this news release looking forward in time involve risks and uncertainties, including primary customer order rates, cancellations, late delivery of customer components which cause production delays, dependence on certain customers, dependence on key executives, variability of quarterly results, single operating facility, competition, product liability risks, control by management, limited trading market and volatility of stock prices, and other risk factors detailed in the company's Securities and Exchange Commission filings.

Cosmetic Group custom develops, formulates and manufactures a wide range of private label color cosmetics and other personal care products. The company also manufactures and markets its own line of professional hair care products under the Zegarelli label. The Zegarelli line is distributed through Sally Beauty Supply Co., a subsidiary of Alberto Culver (NYSE:ACV) and through regional, professional only distributors. -0-

                         Financial Highlights
                (in thousands, except per share data)

                             Third quarter ended  Nine months ended
                                  Sept. 30,           Sept. 30,
                                1996     1995       1996     1995

Net sales                     $ 3,940  $ 2,911    $10,680  $ 5,812
Cost of sales                   2,326    1,983      6,249    4,395
Selling, general and
 administrative expenses        1,272    1,241      3,721    2,679
Total expenses                  1,588    1,362      4,242    2,947
Net income (loss)                  26     (434)       189   (1,530)
Net income (loss) per share   $   .01  $  (.10)   $   .04  $  (.38)

Average shares outstanding      5,064    4,344      5,059    3,978

                                        Sept. 30,    Dec. 31,
                                          1996        1995
Current assets:
  Cash                                  $     4      $    22
  Accounts receivable                     1,909        1,979
  Inventory                               2,716        1,757
  Other                                     942          279
    Total current assets                  5,571        4,037
Total assets                              8,005        6,416
Total current liabilities                 3,350        2,146
Total liabilities                         3,803        2,308
Shareholders' equity                      4,202        4,108

CONTACT: Cosmetic Group U.S.A Inc.

Alfred E. Booth/Jennifer Eggers 

818/767-2889