Cost Plus, Inc. Updates Guidance On Fiscal 2001.

Business Editors

OAKLAND, Calif.--(BUSINESS WIRE)--Oct. 17, 2001

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

The Company indicated that revised guidance was necessitated by the sales and expense implications of the following four factors:

      1.  Continued weakness in the economy, temporarily exacerbated by
        the terrorist activities of September 11.
      2.  Under-stocked situations in its stores during August and early
        September due to an impeded flow of goods in the second
        quarter associated with the installation of a new warehousing
        system, and expenses associated with an accelerated flow of
        goods throughout the third quarter to correct this condition.
      3.  A shift of one promotional sales event from late third quarter
        into early fourth quarter.
      4.  Staff reductions, primarily at corporate headquarters, which
        will result in annualized savings of approximately $2.0
        million in fiscal 2002.

Murray Dashe, Chairman, President and CEO, stated, "Following the terrible events of September 11, we saw a double digit decline in same store sales for several days. At the initiation of our country's efforts in Afghanistan, we also observed a decline of more moderate proportions in same store sales for several days. Sales have since returned to more reasonable levels but are still impacted by a soft economy."

"Additional expenses have been incurred during the third quarter, impacting gross profit, to correct an under-stocked condition in our stores which resulted from the second quarter installation of a new warehousing system. As forecasted in our July 25, 2001 guidance, this problem has now been addressed. Stores are well stocked, and the new warehousing system is functioning to expectations."

"Additionally, in order to maximize sales for the year, management decided to shift the final promotional event of the third quarter to early fourth quarter, transferring sales into the potentially more lucrative pre-holiday time period."

"While we cannot effectively predict consumer behavior in view of current volatile conditions, our merchandise assortments are very strong, and we are well prepared for the holiday season."

Using its information systems for visibility to individual item inventory and sales levels, the Company has approximated and categorized the anticipated same store sales shortfall for the third quarter as follows:

    1.  Sluggish Economy                                 $3.2 million
    2.  Under-stocked condition (now corrected)          $2 million
    3.  Shift in promotional event to fourth quarter     $2 million
    4.  September 11th tragedy and Afghan War            $800,000

For the fiscal third quarter, ending November 3, 2001, the Company now expects its loss per share to be between $0.11 to $0.12 versus prior income per share guidance of $0.04. This revised guidance is predicated on the following major assumptions:

-- Eight new stores opened, consistent with prior guidance.

-- Same store sales in the range of -7% versus prior guidance of +2%.

-- Total sales at approximately $114 million representing an approximate
increase of 12% over the prior year versus prior guidance at $124 million.

-- Gross profit rate in the range of 31.6% to 31.8% versus prior guidance of
34.3% reflecting a shift in mix more heavily weighted toward lower margin
consumables, excess markdowns needed to clear summer goods from inventory, and
increased distribution expenses for reasons previously mentioned.

-- SG&A expense rate at 33.5% to 33.6% versus prior guidance of 31.5%, due to
the effect of a lower sales base, an increase in utility costs, and the costs
associated with job eliminations.

-- Preopening expenses at $1.5 million versus prior guidance of $1.6 million.

-- Pre-tax loss of approximately $3.8 million to $4.3 million versus prior
guidance of $1.4 million in pre-tax income.

For the fiscal fourth quarter, the Company now expects its earnings per share to be $0.86 to $0.92 versus prior guidance of $1.05, with this new estimate predicated on the following major assumptions:

-- Five new stores opened, consistent with prior guidance.

-- Same store sales at -1% to +2% versus prior guidance of +5%

reflecting the impact of the soft economy.

-- Total sales at $225 million to $230 million representing an

approximate increase of 9% to 11% over previous year versus

prior guidance of $240 million.

-- Gross profit rate in the range of 36.5% to 36.7% versus prior

guidance of 37.9%, reflecting the Company's more aggressive

promotional strategy, a higher percentage of consumables in

the sales mix and increased markdowns to clear excess

inventory.

-- SG&A expense rate at 21.9% to 22.1% versus prior guidance of

21.4% due to a lower sales base.

-- Pre-opening expense at approximately $1 million, consistent

with prior guidance.

-- Pre-tax income at approximately $31 million to $33 million

versus prior guidance of $38 million.

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

-- 23 new stores opened as planned.

-- Same store sales flat to -1% versus prior guidance of 3.6%.

-- Total sales at $563 million to $570 million versus prior

guidance of $588 million.

-- Gross profit rate at approximately 34.1% to 34.3% versus prior

guidance of 35.3%.

-- SG&A expense rate at approximately 27.5% to 27.7% versus prior

guidance of 26.9%.

-- Net income at approximately $19 million to $20 million, with

weighted average shares outstanding of approximately 21.9

million, yielding earnings per share of $0.86 to $0.93 versus

prior guidance of $1.22.

The Company will conduct an interim conference call on Thursday, October 18, 2001 at 9:00 a.m. PST. It will be held in a "listen-only" mode for all participants other than the Company's current sell-side and buy-side investment professionals. Phone numbers for the call are [phone] or [phone]. Callers are advised to dial in approximately 15 minutes prior to the scheduled start time. A telephonic replay will be available at [phone], Access Code: 19873073, from 11:00 a.m. to 5:00 p.m. PST on Thursday, October 18. Investors may also access the live call or the replay over the internet at www.streetevents.com; www.aol.com; www.fool.com; and www.wallstreetcity.com. The replay will be available approximately 30 minutes after the live call concludes.

Cost Plus, Inc. is a leading specialty retailer of casual home living and entertaining products. As of October 17, 2001, the Company operated 145 stores in 19 states compared to 121 stores in 19 states last year.

The above statements related to anticipated quarterly and annual 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; further terrorist acts or our nation's response thereto; 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.