FACTORY 2-U STORES, INC. Announces June Sales.

Business Editors

SAN DIEGO--(BUSINESS WIRE)--July 9, 2003

FACTORY 2-U STORES, INC. (Nasdaq: FTUS) today announced that sales for the five-week period ended July 5, 2003 were $49.4 million, a decrease of 1.0% over sales of $49.9 million for the five-week period ended July 6, 2002. Comparable store sales for the five-week period ended July 5, 2003 increased 3.0% versus a decrease of 6.3% for the same period last year. The Company did not open or close any stores during the five-week period ended July 5, 2003.

Sales for the twenty-two week period ended July 5, 2003 totaled $189.7 million compared to $203.5 million for the twenty-two week period ended July 6, 2002, a decrease of 6.8%. Comparable store sales for the twenty-two week period ended July 5, 2003 decreased 3.1% versus a decrease of 11.4% for the same period last year. For the twenty-two weeks ended July 5, 2003, the Company opened 1 new store and closed 3 stores: one of which was closed temporarily for landlord repairs.

Bill Fields, Chairman and Chief Executive Officer, commented, "Our June comparable store sales performance marked our third consecutive month of positive comparable store sales results. With advertising and promotional activities similar to last year, we experienced a 15% increase in transaction counts on a comparable basis. Our Home business performed the best with comparable sales in the mid-teens, followed by our Children's category with positive low single-digit results. Footwear performed the poorest with negative high single-digit comparable sales. Geographically, our best performing areas were in Texas, Las Vegas, Nevada and the Pacific Northwest with comparable store sales in the range of positive 10% to 30%. Orange County and high desert regions of southern California and New Mexico performed the worst with negative comparable store sales in the high single-digits."

Mr. Fields concluded, "We continue to make progress with our merchandise offerings, value statement and in-store execution. We also brought on-line our new distribution center in San Diego, California and we simultaneously closed our two smaller distribution centers in San Diego. As a result of start-up costs associated with our new distribution center, distribution costs will be higher for our second quarter. Our focus for the remainder of our second quarter is to increase transaction counts and continue building on our positive comparable store sales trend of the past three months. Though July was extremely promotional last year, we are targeting July comparable store sales to be in the range of negative 2% to positive 2%. Looking beyond our second quarter, we expect to be profitable in both our third and fourth quarters as a result of anticipated improvement in comparable store sales, lower promotional costs and lower distribution costs."

We will provide a mid-month sales update for July on July 21, 2003 at 5:00 P.M. Eastern Daylight Time. Those interested can access this update message at 1-888-201-9603. This message will remain available until August 18, 2003. We will release our July sales results on August 6, 2003 after the market closes, or approximately 4:00 P.M. Eastern Daylight Time.

We expect to release our second quarter operating results on August 13, 2003 after the market closes, or approximately 4:00 P.M. Eastern Daylight Time. We will host a real-time webcast presentation and live conference call to discuss our second quarter operating results and third quarter sales and operating results expectations, the same day at 5:00 P.M. Eastern Daylight Time. To participate in the call, dial 1-800-843-7949 five minutes before the call or access the Internet at www.factory2-u.com. All shareholders and other interested parties are encouraged to participate. A replay of the call will remain available for 48 hours by telephone or on the Internet through August 27, 2003. You may also obtain a transcript of the call by contacting Kehoe, White & Co., Inc. at 1-562-437-0655.

FACTORY 2-U STORES, INC. operates 242 "Factory 2-U" off-price retail stores which sell branded casual apparel for the family, as well as selected domestics and household merchandise at prices which generally are significantly lower than the prices offered by its discount competitors. The Company operates 31 stores in Arizona, 2 stores in Arkansas, 64 stores in southern California, 63 stores in northern California, 1 store in Idaho, 8 stores in Nevada, 9 stores in New Mexico, 1 store in Oklahoma, 15 stores in Oregon, 34 stores in Texas, and 14 stores in Washington.

Except for the historical information contained herein, the matters discussed in this news release are forward-looking statements that involve risks and uncertainties, and actual results could differ materially from the Company's present expectations. Among the important factors that could cause actual results to differ materially from those indicated in the forward-looking statements are: customer demand and trends in the off-price apparel industry, the effect of economic conditions, the impact of competitive openings and pricing, supply constraints or difficulties, and other risks detailed in the Company's Securities and Exchange Commission filings.