Donnkenny, Inc. Announces Second Quarter Results.

NEW YORK--(BUSINESS WIRE)--August 13, 1998--Donnkenny, Inc. (Nasdaq: DNKY) today announced financial results for the second quarter and six months ended June 30, 1998.

Net sales for the second quarter were $42.2 million, compared to $52.0 million reported for last year s second quarter. The Company reported a loss of $994,000, or a loss of $0.07 per share, compared to a loss of $2.2 million, or a loss of $0.16 per share, for the same period a year ago. The weighted average number of common shares outstanding, for purposes of computing earnings per share, were 14,169,540 compared to 14,069,940 for the comparable period in 1997.

For the six months, net sales were $94.7 million, compared to $114.3 million reported for the corresponding period in 1997. The Company reported net income of $27,000, or $0.00 per share, compared to a loss of $1.2 million, or a loss of $0.09 per share, for the same period a year ago. The weighted average number of common shares outstanding, for purposes of computing earnings per share, were 14,130,100 compared to 14,066,901 for the comparable period in 1997.

Harvey Appelle, Chairman of Donnkenny, Inc. commented, "Sales levels in the second quarter of fiscal 1998 were below those achieved last year principally due to the exiting of our licensed character business, as well as a volume decline in our Victoria Jones(R) knits and sweater division due to softer retail conditions, partially caused by warmer weather."

Mr. Appelle concluded, "We continue to be on-track towards obtaining healthier gross margins as we achieved gross margins of 21.5% in the second quarter of 1998, versus 20.0% last year. Additionally, we were able to reduce operating expenses on an absolute dollar basis by $2.5 million."

Donnkenny designs, manufactures, imports and markets a broad line of moderately-priced sportswear. The Company's major labels include Casey & Max(R), Donnkenny(R), Pierre Cardin(R) and Victoria Jones(R).

Except for historical information contained herein, the statements in this release are forward-looking and made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements involve known and unknown risks and uncertainties that may cause the Company's actual results in future periods to differ materially from forecasted results. Those risks include, a softening of retailer or consumer acceptance of the Company's products or pricing pressures and other competitive factors. These and other risks are more fully described in the Company's 10-K and 10-Q filings with the Securities and Exchange Commission.

                   DONNKENNY, INC. AND SUBSIDIARIES
                 CONSOLIDATED STATEMENTS OF OPERATIONS
            (In thousands, except share and per share data)
                              (Unaudited)

                    Three Months Ended       Six Months Ended
                         June 30,                June 30,
                     1998        1997        1998        1997

Net sales          $ 42,157   $ 52,041    $ 94,685   $ 114,326
Cost of sales        33,074     41,647      72,651      88,950
    Gross profit      9,083     10,394      22,034      25,376
Selling, general &
 administrative
 expenses             9,821     12,328      19,803      24,038

Amortization of
 excess cost over
 fair value of net
 assets acquired
 and other related
 acquisition costs      326        338         647         702

Operating
 (loss) income       (1,064)    (2,272)      1,584         636

Interest expense
 (net of interest
 income of $110
 during 1998)           847      1,375       1,533        2,600

(Loss) income
 before income
 taxes               (1,911)    (3,647)         51       (1,964)

Income tax
 (benefit) provision   (917)    (1,425)         24         (753)

Net (loss) income    $ (994)  $ (2,222)      $  27    $  (1,211)

Basic and diluted
 net (loss) income
 per common share    $(0.07)  $  (0.16)      $ 0.00   $   (0.09)

Weighted average
number of common
shares outstanding 14,169,540   14,069,940   14,130,100    14,066,901


                   DONNKENNY, INC. AND SUBSIDIARIES
                      CONSOLIDATED BALANCE SHEETS
                 (In thousands, except per share data)


                                  June 30,     December 31
                                    1998             1997
                                 (Unaudited)

ASSETS

CURRENT ASSETS:
   Cash                             $   815    $     257
   Accounts receivable - net of
    allowances of $748 and $720      26,825       24,453
   Recoverable income taxes             809        1,181
   Inventories                       30,090       27,248
   Deferred tax assets                5,109        5,109
   Prepaid expenses and other
    current assets                    2,192        2,146

       TOTAL CURRENT ASSETS          65,840       60,394

Property, plant and equipment,
 net                                  9,983        9,620
Other assets                          1,250            -
Intangible assets                    32,882       32,446

TOTAL ASSETS                      $ 109,955   $  102,460

LIABILITIES AND STOCKHOLDERS
EQUITY

CURRENT LIABILITIES:
Current portion of long term
  debt and capital lease         $    2,500    $   5,000
Revolving credit facility            30,800            -
Accounts payable                     10,484        9,320
Accrued expenses and other
  current liabilities                 7,201        7,720

      TOTAL CURRENT LIABILITIES      50,985       22,040

Long term portion of capital
lease                                   335            -
Long term debt net of current
portion                                   -       22,048
Deferred income tax liabilities       5,286        5,286

STOCKHOLDERS  EQUITY:
Common stock, $0.01 par
 value.  Authorized
 20,000 shares; issued and
 outstanding
 14,170 and 14,075 shares               142          141

Additional paid-in capital           47,595       47,360
 Retained earnings                    5,612        5,585
   Total stockholders                53,349       53,086
    equity

TOTAL LIABILITIES AND
STOCKHOLDERS  EQUITY           $    109,955    $ 102,460

CONTACT: Harvey Appelle

Chairman

212-730-7770

or

Investor Relations:

David Walke/Shannon Moody 

Press: Michael McMullan 

Morgen-Walke Associates, Inc.

212-850-5600