Cache Reports Record Fourth Quarter 2004 Earnings of $0.39 Per Share;

Cache Reports Record Fourth Quarter 2004 Earnings of $0.39 Per Share; Company Reports Record Sales and Earnings for 2004

    Business Editors

    NEW YORK--(BUSINESS WIRE)--Feb. 15, 2005--

    Company Introduces Fiscal 2005 Guidance Range of $0.99 - $1.02;
    Company Announces Auditors Will Not Stand for Re-Appointment for
    Fiscal 2005

    Cache Inc., (NASDAQ: CACH), a specialty chain of women's apparel stores with 291 stores open, reported results for the fourteen and fifty-three week periods ended January 1, 2005, with each period reflective of the 3 for 2 stock split completed June 18, 2004.
    For the fourteen week period ended January 1, 2005, as compared to the thirteen week period in fiscal 2003:

--	Net sales rose by 21.7% to $78.6 million compared to $64.6 million, in the thirteen week 2003 period and comparable store sales gained 4%;
--	Operating income increased by 10.3% to $9.6 million, or 12.2% of net sales, as compared to $8.7 million, or 13.5% of net sales in 2003;
--	Net income grew by 17.0% to $6.2 million, or 7.9% of net sales, as compared to $5.3 million, or 8.2% of net sales in 2003; and
--	Diluted earnings per share increased by 14.7% to $0.39 compared to $0.34 in 2003, as compared to the First Call consensus estimate of $0.39.

    Commenting on the results, Mr. Brian Woolf, Cache Chairman and Chief Executive Officer, stated: "Fiscal 2004 marked a rewarding period for Cache. We drove double digit gains in net sales and earnings and implemented strategies that proved successful in garnering increased market share. Our initiatives, such as expanding the penetration of sportswear, accessories and distributing lifestyle mailers, led to a strong performance in the holiday season with comparable store sales rising by 7% in December. We are pleased to have met analysts' expectations for the fourth quarter and full year, especially given the increased expenditures incurred to comply with the requirements of Sarbanes Oxley. These costs ran significantly over budgeted amounts with these amounts negatively impacting reported earnings by approximately one to two cents per share in the fourth quarter.
    "More importantly, we are excited to begin the new year with strong positive momentum and expect to report another record year in fiscal 2005," Mr. Woolf added.
    For the fifty three week period, as compared to the fifty two week period in fiscal 2003:

    -- Net sales rose by 14.3% to $247.3 million compared to $216.3
    million, in the fifty-two week period in 2003 and comparable
    store sales gained 5%;

    -- Operating income increased by 16.8% to $20.9 million, or 8.4%
    of net sales compared to $17.9 million, or 8.3% of net sales,
    in 2003;

    -- Net income grew by 19.8% to $13.3 million, or 5.4% of net
    sales compared to $11.1 million, or 5.1% of net sales in 2003;
    and

    -- Diluted earnings per share increased by 10.7% to $0.83
    compared to $0.75 in 2003, as compared to the First Call
    consensus estimate of $0.83.

    Additionally, during 2004 the Company:

    -- Opened 31 Cache and 9 Lillie Rubin stores and at year-end
    operated 291 stores in 43 states;

    -- Completed 19 remodels with 47% of its Cache store base in the
    new store format at year-end;

    -- Increased sportswear penetration in its Cache and Lillie Rubin
    stores, which helped to increase the comparative sales in
    fiscal 2004:

    Gross profit in the fourth quarter rose by 22.0% to $37.1 million, or 47.2% of net sales, compared to $30.4 million, or 47.0% of net sales, in the fourth quarter of 2003. The improvement in gross profit margin resulted from increased merchandising margins mainly attributed to sourcing improvements. In total, operating expenses were $27.5 million, or 35.1% of net sales compared to $21.6 million, or 33.5% of net sales in the fourth quarter of 2003.
    Fiscal year gross profit rose by 16.9% to $111.6 million, or 45.1% of net sales, compared to $95.5 million, or 44.2% of net sales, in fiscal 2003. In total, operating expenses were $90.7 million, or 36.7% of net sales compared to $77.6 million, or 35.9% of net sales in Fiscal 2003.
    The Company's balance sheet remained strong. At January 1, 2005, cash and marketable securities totaled $42.7 million, rising $6.1 million from $36.6 million at December 27, 2003. Inventory was on plan and current at $32.3 million, as compared to $26.7 million at December 27, 2003. Of the 21.0% rise in inventory, 14% was due to the growth in new stores, with the remaining increase planned to capture early spring merchandise sales. Working capital increased by $12.4 million to $53.4 million from $41.0 million at December 27, 2003.

A table summarizes financial results follows:

53 Weeks 52 Weeks 14 Weeks 13 Weeks Ended Ended Ended Ended ------------------- ------------------- Jan. 1, Dec. 27, Jan. 1, Dec. 27, 2005 2003 2005 2003 ---- ---- ---- ---- ($ Thousands, except for per share data)

Sales $ 247,300 $ 216,256 $ 78,589 $ 64,622

Operating income $ 20,868 $ 17,905 $ 9,576 $ 8,721

Net income $ 13,297 $ 11,089 $ 6,208 $ 5,293

Basic earnings per share $ 0.85 $ 0.78 $ 0.40 $ 0.35

Diluted earnings per share $ 0.83 $ 0.75 $ 0.39 $ 0.34

Basic weighted average shares outstanding 15,589,000 14,256,000 15,645,000 14,955,000

Diluted weighted average shares outstanding 16,004,000 14,721,000 16,060,000 15,470,000

    Guidance

    The Company estimates fiscal 2005 net sales in the range of $275 million to $280 million compared to $247.3 million in fiscal 2004. Fiscal 2005 diluted earnings per share is currently estimated in the range of $0.99 to $1.02 compared to actual diluted earnings per share of $0.83 in fiscal 2004, which represents growth of 21.1% at the mid-point of the range. For the first quarter, the Company estimates net sales to range between $65 million and $67 million compared to actual net sales of $57.2 million in the first quarter of fiscal 2004. The Company estimates first quarter 2005 diluted earnings per share in the range of $0.21 to $0.23, compared to actual diluted earnings per share of $0.20 in the first quarter of fiscal 2004. The Company also noted that its current guidance does not include the effect of accounting changes, which require the expensing of stock options.
    Mr. Woolf concluded: "We remain enthusiastic regarding our outlook. To this end, as we begin 2005, our sales are in line with our expectations with comparable store sales during the first two weeks of February continuing our expected trend for a low single digit increase. Our priorities for the year are focused on furthering our store expansion while intensifying our merchandising efforts. We are also excited by the opportunity to implement a national loyalty program in the second half of 2005 and believe the investment in our new POS system will lead to additional sales and cost advantages in 2005 and beyond."

    Store opening plans

    The Company also noted that it has plans to open between 30 and 35 new stores in fiscal 2005. The Company plans to end the year with approximately 325 locations, increasing square footage by 9% to 11% to approximately 660,000 square feet. The Company also indicated that it expects to open approximately 15 stores during the first half of the year.

    Auditor announcement

    Separately, the Company announced that KPMG, the Company's independent registered accountants, will not stand for re-appointment, as the Company's auditors, beginning with fiscal 2005. There have been no disagreements between the Company and KPMG with respect to any accounting principle or practices.

    Conference Call

    The Company also announced that it will conduct a conference call to discuss its fourth quarter and fiscal 2004 results today, Tuesday, February 15, 2005 at 9:00 a.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial (888) 202-2422, approximately ten minutes prior to the start of the call. The conference call will also be webcast live at www.cache.com. A replay of this call will be available until February 22, 2005 and can be accessed by dialing (888) 203-1112 and entering code 7482002.

    Certain matters discussed within this press release may constitute forward-looking statements within the meaning of the federal securities laws. Although Cache, Inc. believes the statements are based on reasonable assumptions, there can be no assurance that these expectations will be attained. Actual results and timing of certain events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors, including, without limitation, industry trends, merchandise and fashion trends, competition, changes in general economic conditions and consumer spending patterns, vendor procurement issues and the ability to obtain financing, as well as other risks outlined from time to time in the filings of Cache, Inc., with the Securities and Exchange Commission.

    Financial Tables Follow:

    For further information contact Thomas E. Reinckens, President, Chief Operating Officer, Cache, Inc., 1440 Broadway, New York, New York 10018, (212) 575-3246.

CACHE, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS

ASSETS

December 27, January 1, 2003 2005 ------------ ------------

CURRENT ASSETS Cash and equivalents $ 16,887,000 $ 16,848,000 Marketable securities 19,746,000 25,874,000 Receivables, net 4,614,000 6,545,000 Inventories 26,724,000 32,296,000 Deferred income taxes and other tax assets 936,000 567,000 Prepaid expenses 1,239,000 1,851,000 ------------- ------------- Total Current Assets 70,146,000 83,981,000

EQUIPMENT AND LEASEHOLD IMPROVEMENTS, net 33,048,000 47,118,000

OTHER ASSETS 873,000 832,000 ------------- -------------

Total Assets $104,067,000 $131,931,000 ============= =============

LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES Accounts payable $ 14,362,000 $ 17,055,000 Accrued compensation 4,675,000 1,927,000 Accrued liabilities 10,075,000 11,627,000 ------------- ------------- Total Current Liabilities 29,112,000 30,609,000 ------------- -------------

OTHER LIABILITIES 9,126,000 13,556,000 DEFERRED INCOME TAXES, net 687,000 2,926,000

STOCKHOLDERS' EQUITY Common stock 100,000 157,000 Additional paid-in capital 28,361,000 34,705,000 Retained earnings 36,681,000 49,978,000 ------------- ------------- Total Stockholders' Equity 65,142,000 84,840,000 ------------- -------------

Total Liabilities and Stockholders' Equity $104,067,000 $131,931,000 ============= =============

CACHE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME

52 Weeks 53 Weeks Ended Ended ------------- ------------- DECEMBER 27, JANUARY 1, 2003 2005 ------------- -------------

NET SALES $216,256,000 $247,300,000

COST OF SALES, including buying and occupancy 120,731,000 135,745,000 ------------ ------------

GROSS PROFIT 95,525,000 111,555,000 ------------ ------------

EXPENSES Store operating expenses 63,546,000 76,466,000 General and administrative expenses 14,074,000 14,221,000 ------------ ------------ TOTAL EXPENSES 77,620,000 90,687,000 ------------ ------------

OPERATING INCOME 17,905,000 20,868,000 ------------ ------------

OTHER INCOME (EXPENSE) Interest income 259,000 439,000 Miscellaneous income (net) 14,000 20,000 ------------ ------------ TOTAL OTHER INCOME 273,000 459,000 ------------ ------------

INCOME BEFORE INCOME TAXES 18,178,000 21,327,000

INCOME TAX PROVISION 7,089,000 8,030,000 ------------ ------------

NET INCOME $ 11,089,000 $ 13,297,000 ============= =============

BASIC EARNINGS PER SHARE $0.78 $0.85 ============ ============

DILUTED EARNINGS PER SHARE $0.75 $0.83 ============ ============

BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 14,256,000 15,589,000 ============ ============

DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 14,721,000 16,004,000 ============ ============

NUMBER OF STORES OPEN AT END OF PERIOD 255 291

CACHE, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME

13 Weeks 14 Weeks Ended Ended -------------------------

DECEMBER 27, JANUARY 1, 2003 2005 ------------ ------------

NET SALES $64,622,000 $78,589,000

COST OF SALES, including buying and occupancy 34,270,000 41,467,000 ----------- -----------

GROSS PROFIT 30,352,000 37,122,000 ----------- -----------

EXPENSES Store operating expenses 17,462,000 22,842,000 General and administrative expenses 4,169,000 4,704,000 ----------- ----------- TOTAL EXPENSES 21,631,000 27,546,000 ----------- -----------

OPERATING INCOME 8,721,000 9,576,000 ----------- -----------

OTHER INCOME (EXPENSE) Interest income 67,000 130,000 Miscellaneous income (net) 0 0 ----------- ----------- TOTAL OTHER INCOME 67,000 130,000 ----------- -----------

INCOME BEFORE INCOME TAXES 8,788,000 9,706,000

INCOME TAX PROVISION 3,495,000 3,498,000 ----------- -----------

NET INCOME $ 5,293,000 $ 6,208,000 ============ ============

BASIC EARNINGS PER SHARE $0.35 $0.40 =========== ===========

DILUTED EARNINGS PER SHARE $0.34 $0.39 =========== ===========

BASIC WEIGHTED AVERAGE SHARES OUTSTANDING 14,955,000 15,645,000 =========== ===========

DILUTED WEIGHTED AVERAGE SHARES OUTSTANDING 15,470,000 16,060,000 =========== ===========

NUMBER OF STORES OPEN AT END OF PERIOD 255 291

--30--SS/ny*

CONTACT: Cache, Inc. Thomas E. Reinckens, 212-575-3246

KEYWORD: NEW YORK INDUSTRY KEYWORD: CONSUMER/HOUSEHOLD APPAREL/TEXTILES RETAIL EARNINGS CONFERENCE CALLS SOURCE: Cache Inc.

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