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

Business Editors

FACTORY 2-U STORES, INC. (Nasdaq:FTUS) today announced that sales for the five-week period ended July 6, 2002 were $49.9 million, a decrease of 5.4% over sales of $52.8 million for the five-week period ended July 7, 2001. Comparable store sales for the five-week period ended July 6, 2002 decreased 6.3% versus a decrease of 5.5% for the same period last year. For the five-week period ended July 6, 2002, the Company closed 1 store in California.

Sales for the twenty-two week period ended July 6, 2002 totaled $203.5 million compared to $221.5 million for the twenty-two week period ended July 7, 2001, a decrease of 8.1%. Comparable store sales for the twenty-two week period ended July 6, 2002 decreased 11.4% versus a decrease of 4.1% for the same period last year. For the twenty-two weeks ended July 6, 2002, the Company opened 8 new stores and closed 30 stores.

Mike Searles, Chairman and Chief Executive Officer, commented, "June's comparable sales improved versus recent trends as a result of our strengthened promotional activities. For the last week of June, we added a Home promotional event to our advertising calendar, which helped us to achieve a strong finish in June. Our strongest performing merchandise category was Infant/Toddler with positive low double-digit comparable store sales followed by Home with positive low single-digit comparable store sales. Our Men's category, as has been the trend, performed the poorest with mid-teen negative double-digit comparable store sales. Geographically, the central valley, high dessert and orange county regions of California performed the best on a comparable store sales basis while Nevada, Arizona and New Mexico were the poorest."

Mr. Searles concluded, "As previously announced, we are well underway with our store reset program which includes merchandise department moves within our stores, a new in-store signage and graphics package, lighting upgrades and the rejuvenation of store floors and fitting rooms. We expect to complete this reset program by July 21, 2002 and commence a chain wide grand re-opening campaign. We continue to anticipate comparable store sales for our second quarter to be in the mid to high negative single-digit range and a loss of between $0.14 and $0.18 per share for the second quarter as a result of increased promotional activity associated with the grand re-opening of our 257 Factory 2-U stores."

We will provide a mid-month sales update for July on July 22, 2002 at 5:00 P.M. Eastern Standard Time. Those interested can access this update message at 1-888-201-9603. This message will remain available until August 19, 2002. We will release our July sales results on August 7, 2002 after the market closes, or approximately 4:00 P.M. Eastern Standard Time.

We expect to release our second quarter operating results on August 14, 2002 after the market closes, or approximately 4:00 P.M. Eastern Standard 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 Standard 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 28, 2002. 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 257 "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 33 stores in Arizona, 3 stores in Arkansas, 63 stores in southern California, 62 stores in northern California, 1 store in Idaho, 5 stores in Louisiana, 3 stores in Missouri, 8 stores in Nevada, 9 stores in New Mexico, 2 stores in Oklahoma, 14 stores in Oregon, 2 stores in Tennessee, 36 stores in Texas, and 16 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.