Cost Plus, Inc. Updates Guidance On Fiscal 2001; Re-Affirms Current Earnings Per Share Estimates.

Business Editors

OAKLAND, Calif.--(BUSINESS WIRE)--July 25, 2001

Cost Plus, Inc. (Nasdaq:CPWM) announced today that it was providing updated guidance on sales and earnings for the remaining three quarters of fiscal 2001.

For the fiscal second quarter ending August 4, the Company still expects its earnings per share to be $0.07, with this estimate predicated on the following major assumptions:

-- Five new stores opened vs. five planned.

-- Same store sales at 0% to -2% vs. 3.5% planned and 7.1% last year.

-- Total sales at approximately $112 million vs. $113 million planned,
reflecting strong performance in sales at newer stores.

-- Gross profit rate at approximately 33.3% vs. 34.0% planned, primarily due to
a continuation of the Company's more aggressive promotional strategy; a greater
percentage of consumables in the sales mix to help drive foot traffic; reduced
leverage on occupancy costs from lower same store sales, and to continued
increases in fuel and transportation costs.

-- SG&A expense rate at approximately 30.1% vs. 30.7% planned, due to continued
improvements in leverage on store payroll and corporate overhead.

-- Net income at approximately $1.5 million vs. $1.6 million planned, with
earnings per share unchanged at $0.07.

Murray Dashe, Chairman, President and CEO, stated, "Same store sales performance in the quarter has been impacted by the following: a continued general softness in the economy faced by most retailers; a weaker response to outdoor furnishings which has also affected other home furnishings retailers; and, in the short run, to a slower flow of inventory to the stores in connection with the installation of our new warehousing system.

"Regarding this new system, it was brought up on time and on budget, and is functioning essentially in accordance with its design. However, the learning curve and training issues involved in starting up the system have temporarily impeded the flow of goods to our stores.

"We are pleased with the new system, and it is critical to supporting our growth. We expect to be through these training issues and back to normal inventory flows during the third quarter, with no interruption in the processing of our seasonal merchandise.

"Sales performance in our newer stores has been very strong, and we are pleased with our reception in both new and existing markets. We continue to believe that our more aggressive promotional strategy is appropriate for this challenging economic environment and that our consumables offering remains a key differentiator to help keep Cost Plus World Market stores in the minds of our customers."

For the fiscal third quarter, the Company still expects its earnings per share to be $0.04, with this estimate predicated on the following major assumptions:

-- Eight new stores opened vs. seven planned. The additional

store is an acceleration of an opening from the fourth

quarter.

-- Same store sales at approximately 2.0% vs. 3.8% planned and

5.6% last year, primarily to reflect continued softness in the

economy and the remaining impact from training issues on the

new warehousing system.

-- Total sales at approximately $124 million vs. $123 million

planned, reflecting continued strength in sales performance of

our newer stores.

-- Gross profit rate at approximately 34.3% vs. 34.6% planned,

reflecting a continuation of the Company's promotional

strategy and a higher percentage of consumables in our sales

mix to help drive foot traffic.

-- SG&A expense rate at approximately 31.5% vs. 31.9% planned,

due to continued improvements in leverage on store payroll and

corporate overhead operations.

-- Pre-opening expense at $1.6 million vs. $1.4 million planned,

to reflect the additional new store in the quarter.

-- Pre-tax income at approximately $1.4 million as planned, and

net income at approximately $800,000 as planned.

For the fiscal fourth quarter, the Company still expects its earnings per share to be $1.05, with this estimate predicated on the following major assumptions:

-- Five new stores opened vs. six planned, as one opening was

accelerated into the third quarter.

-- Same store sales at approximately 5.0% vs. 6.5% planned and

2.1% last year, primarily to reflect continued softness in the

economy.

-- Total sales at approximately $240 million vs. $239 million

planned, reflecting continued strength in sales performance of

our newer stores.

-- Gross profit rate at approximately 37.9% vs. 38.3% planned,

reflecting a continuation of the Company's more aggressive

promotional strategy and a higher percentage of consumables in

our sales mix.

-- SG&A expense rate at approximately 21.4% vs. 21.7% planned, to

reflect continued improvements in leverage on store payroll,

advertising, and corporate overhead operations.

-- Pre-opening expense at $966,000 vs. $1,124,000 due to the

acceleration of one new store into the third quarter.

-- Pre-tax income at $38.1 million as planned, and net income at

$23.3 million as planned.

The preceding assumptions by quarter now produce the following financial forecast for fiscal 2001:

-- 23 new stores opened as planned.

-- Same store sales at approximately 3.6% vs. 4.6% planned and

4.6% last year.

-- Total sales at approximately $588 million vs. $587 million

planned.

-- Gross profit rate at approximately 35.3% vs. 35.7% planned.

-- SG&A expense rate at approximately 26.9% vs. 27.2% planned.

-- Net income at $26.8 million vs. $26.9 million planned, with

weighted average shares outstanding at 22.0 million, yielding

earnings per share of $1.22, as planned.

Mr. Dashe further commented, "While we have seen some softness in our same store sales, partially due to the temporary slowdown in the flow of goods to stores, we believe that the sales performance in our newer stores is quite encouraging. Additionally, strong but prudent expense controls, new systems enhancements, and improved store operations productivity will help us maintain lower SG&A rates to ensure that we continue to offer our customers the excellent values they have come to expect from Cost Plus over the years."

Cost Plus, Inc. is a leading specialty retailer of casual home living and entertaining products. As of July 25, 2001, the Company operated 137 stores in 19 states compared to 112 stores in 17 states as of this time last year.

The above statements related to anticipated quarterly financial results for fiscal 2001 are "forward-looking statements" which are based on current expectations and are subject to various risks and uncertainties which could cause actual results to differ materially from those forecasted. Such risk factors include, but are not limited to: changes in economic conditions that affect consumer spending; changes in the competitive environment; delays in the flow of merchandise; increases in fuel and transportation costs; store construction delays; changes in the anticipated opening of the Company's new distribution center in Virginia; labor market fluctuations; unseasonable weather conditions and changes in accounting rules and other regulations. Please refer to documents on file with the Securities and Exchange Commission for a more detailed discussion of the Company's risk factors. The Company does not undertake any obligation to update its forward-looking statements.