Garden Botanika Reports Second Quarter Operating Results.

REDMOND, Wash.--(BUSINESS WIRE)--Aug. 28, 1996--Garden Botanika, Inc. (Nasdaq NM: GBOT) today reported operating results for its fiscal 1996 second quarter and the 26 weeks ended August 3, 1996.

For the quarter, sales increased 67% to $16.9 million from $10.1 million in the second quarter of fiscal 1995. Store sales increased 61% on the strength of an increase in the number of stores from 104 to 186 and a 2% increase in comparable stores sales (for stores open at least 12 full months). Catalog sales increased 175%, primarily as a result of increased circulation.

Garden Botanika reported a net loss of $2.0 million, or $0.31 per share on approximately 6.5 million shares, for the second quarter of fiscal 1996, compared to a net loss of $0.8 million, or $0.23 per share on approximately 3.7 million shares, in the second quarter of fiscal 1995. The Company did not record an income tax provision in the second quarter of either year due to its operating loss carryforwards; however, the Company estimates that, on a fully taxed basis, its net losses would have been $0.18 and $0.14 per share in the respective quarters.

For the 26-week period ended August 3, 1996, sales increased 71% to $33.6 million from $19.7 million in the comparable prior period. Store sales increased 65% on the strength of the increase in the number of stores and a 6% increase in comparable stores sales. Catalog sales increased 143%, primarily as a result of increased circulation.

Garden Botanika reported a net loss of $4.7 million, or $0.89 per share on approximately 5.2 million shares, for the first 26 weeks of fiscal 1996, compared to a net loss of $1.7 million, or $0.45 per share on approximately 3.7 million shares, in the first half of fiscal 1995. The Company did not record an income tax provision in the first half of either year due to its operating loss carryforwards; however, the company estimates that, on a fully taxed basis, its net losses would have been $0.54 and $0.27 per share in the respective 26-week periods.

Commenting on the Company's second quarter results, Garden Botanika President Michael Luce said, "Our results during the second quarter were mixed. Solid performances in various aspects of our operations were overshadowed by a disappointing comparable store sales performance. On the positive side, good expense controls allowed us to meet our earnings expectations. In addition, our store expansion continued on pace with new store sales exceeding our expectations, and product margins continued to improve significantly over the prior year. Sales of Transparencies, our new line of fragrance and bath products launched in June, were also ahead of plan."

"The quarter also contained significant disappointments," Luce continued, "especially relative to comparable store sales. The 2% increase in the quarter was below our expectations, and the apparent trade off of sales between existing and new product lines was disappointing. Furthermore, we had expected that comparable store performance during the third quarter would improve due to the much easier comparisons with last year. However, results during the first three weeks of August, while somewhat better than July, have likewise been disappointing and, if continued, could impact third quarter earnings. We are focusing considerable efforts and resources on improving this trend in our business."

Garden Botanika markets botanically based cosmetic and personal care products through its 196 stores across the U.S. and its own catalog. The Company's headquarters are located at 8624-154th Avenue NE, Redmond, Washington 98052, and its investor relations telephone number is 206/883-GBOT.

Forward Looking Statements: When used in the above discussion in the context of future events, the words "expects," "anticipates," "estimates," "plans," "believes" and similar expressions are intended to identify forward looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results or trends to differ materially from those projected. See the "Risk Factors" section of the Company's Prospectus dated May 22, 1996, contained in a Registration Statement on Form S-1 which has previously been filed with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward looking statements, which speak only as of the date hereof. The Company undertakes no obligation to publicly release the result of any revisions to these forward looking statements that may be made to reflect events or circumstances after the date hereof or to reflect the occurrence of unanticipated events. -0-

CONDENSED BALANCE SHEETS
(dollars in thousands)

                                 (Unaudited)
                                  August 3,        February 3,
                                    1996              1996

Assets
Cash and cash equivalents       $  43,191          $  1,309
Inventories                        11,462            10,176
Prepaid expenses                    1,897             2,103
Receivable from lessors             2,739             1,639
Other                                  93               346
  Total current assets             59,382            15,573

Property and equipment, net        36,206            31,176
Other assets                          228               388
  Total assets                  $  95,816          $ 47,137

Liabilities & Shareholders'
 Equity

Checks drawn in excess of bank
 balances                       $   2,288          $  3,616
Note payable to bank                   --             2,540
Accounts payable                    5,392             5,138
Other current liabilities           2,019             1,617
  Total current liabilities         9,699            12,911

Deferred rent and other             1,431             1,109
  Total liabilities                11,130            14,020

Commitments
Shareholders' equity               84,686            33,117
  Total liabilities &
   shareholders' equity         $  95,816          $ 47,137

These summary financial statements should be read in conjunction
with the financial statements and accompanying footnotes included in
the Garden Botanika, Inc. Prospectus dated May 22, 1996, contained
in a Registration Statement on Form S-1 which has previously been
filed with the Securities and Exchange Commission

                 CONDENSED STATEMENTS OF OPERATIONS
            (dollars in thousands, except per share data)

                                           (Unaudited)
                               Quarter Ended          26 Weeks Ended
                            August 3,   July 29,    August 3,   July 29,
                               1996       1995         1996       1995

Net sales                    $16,916    $10,138      $33,563    $19,670
Cost of sales (including
 buying and occupancy
  costs)                      10,123      5,926       19,724     11,374
  Gross margin                 6,793      4,212       13,839      8,296

Operating expenses:
  Stores and catalog           6,835      3,454       13,902      7,128
  General and administrative   2,007      1,459        4,133      2,709
Preopening expenses              252        176          606        242
    Operating loss            (2,301)      (877)      (4,802)    (1,783)

Interest income, net             314         41          130        120
    Net loss                 $(1,987)     $(836)     $(4,672)   $(1,663)

Net loss per share,
 giving effect to the
  conversion of all
   Preferred shares to
    Common                    $(0.31)    $(0.23)      $(0.89)    $(0.45)

Weighted average Common and
 Common equivalent shares      6,487      3,707        5,225      3,707

                   CONDENSED STATEMENTS OF CASH FLOWS
                         (dollars in thousands)

                                 (Unaudited)
                               26 Weeks Ended
                             August 3,   July 29,
                               1996        1995

Operating Activities
--------------------
Net loss                     $(4,672)   $(1,663)
Expenses not requiring
 use of cash                   2,224      1,222
Changes in assets and
 liabilities                  (2,116)    (3,726)
  Net cash used by
   operating activities       (4,564)    (4,167)

Investing Activities
--------------------
Additions to property and
 equipment                    (7,255)    (5,716)
  Net cash used by
   investing activities       (7,255)    (5,716)

Financing Activities
--------------------
Sale of stock                 56,191      9,954
Payments on note payable
 to bank, net                 (2,540)        --
Other                             50         --
  Net cash provided by
   financing activities       53,701      9,954
  Increase in cash and
   cash equivalents          $41,882        $71

CONTACT: Garden Botanika

Michael W. Luce/ Myron E. Kirkpatrick, 206/881-9603