Cost Plus, Inc. Reduces Net Loss from Continuing Operations by 16.5% in the Second Quarter Compared to Last Year and Provides Outlook for the Third Quarter

OAKLAND, Calif.--(Business Wire)--
Cost Plus, Inc. (NASDAQ:CPWM) today announced financial results for its second
quarter ended August 1, 2009 and provided financial guidance for the third
quarter of fiscal year 2009.

Second Quarter Results from Continuing Operations

Net sales for the second quarter of fiscal 2009 were $183.4 million, a 13.0%
decrease from $210.7 million for the second quarter ended August 2, 2008. Same
store sales for the quarter decreased 10.9% compared to an increase of 1.2% last
year and were within guidance which was in the range of a decrease of 9.5% to
14.5%. The decrease in same store sales was attributable to a 7.7% reduction in
the average ticket per customer primarily due to lower dining and living
furniture sales and a 3.4% decline in customer count. Year-to-date, net sales
were $367.6 million, a 10.9% decrease from the same period last year, while same
store sales decreased 9.9% versus a 0.9% increase for the same period last year.

Gross profit margin as a percentage of net sales was 26.2% for the second
quarter of fiscal 2009 versus 27.0% last year. The 80 basis point decline was
entirely due to decreased leverage of fixed occupancy expenses on lower same
store sales, partially offset by a net improvement in merchandise margin of 50
basis points. The improvement in merchandise margin resulted from tighter
inventory controls which led to lower shrink expense. Reductions in the cost of
merchandise were offset by promotional activity required to compete with
aggressive discounting among higher end specialty retailers and discount chains.
Additionally, consumables continued to outperform home furnishings which put
pressure on margin rate. Year-to-date, gross profit margin as a percentage of
net sales was 26.1% versus 27.3% for the same period last year due to decreased
leverage of fixed occupancy costs. Year-to-date, merchandise margin as a
percentage of net sales increased 20 basis points from the same period last year
due to lower shrink expense and lower supply chain costs.

Selling, general and administrative (SG&A) expenses for the second quarter of
fiscal 2009 were $64.5 million versus $76.2 million last year, a decrease of
$11.7 million. Year-to-date, SG&A expenses decreased $19.4 million to $129.0
million versus $148.4 million for the same period last year. The decrease in
SG&A expenses for the second quarter and first half of the year were due to the
Company`s cost-cutting initiatives including store closures which resulted in
lower payroll, advertising and other controllable expense.

For the second quarter of fiscal 2009, the loss from continuing operations
before interest and taxes ("EBIT loss") declined 18.5% to $16.8 million versus
$20.6 million last year and was within the guidance range of a $14 million to
$21 million EBIT loss. The net loss from continuing operations for the second
quarter of fiscal 2009 declined 16.5% to $19.8 million, or $0.90 per diluted
share, compared to a net loss of $23.7 million, or $1.07 per diluted share last
year.

As of the end of the second quarter of fiscal 2009, inventory levels declined
30.4% year-over-year. The reduction in inventory is the result of store closures
and planned decreases in SKU (stock keeping unit) count and weeks of supply. The
Company ended the second quarter with $65.3 million in borrowings and $9.5
million in letters of credit outstanding under its asset-based credit facility
compared to $72.2 million in borrowings and $11.5 million in letters of credit
outstanding last year. The Company anticipates that borrowings will peak in
mid-November at a lower level than last year. The $200 million asset-based
credit facility expires in mid-2012.

Barry Feld, President and CEO, commented, "Despite the continued tough retail
environment and its negative impact on same store sales, we were able to control
expenses and improve merchandise margin to reduce our second quarter loss from
continuing operations year-over-year. Our first half results are tracking to
plan and borrowings outstanding under our credit facility are lower than the
same time last year. The Company`s liquidity position remains sufficient for
working capital purposes."

Third Quarter Outlook - Continuing Operations

The Company`s guidance for the third quarter of fiscal 2009 anticipates
continued economic volatility, weak consumer demand and pressure on the
furniture business. For the third quarter of fiscal 2009, the Company expects
net sales in the range of $177 million to $186 million, based on a same store
sales decrease in the range of 6% to 11%. For the third quarter of fiscal 2009,
the Company is projecting a loss from continuing operations before interest and
taxes in the range of $19 million to $24 million versus a loss of $21.0 million
last year.

The Company continues to evaluate individual store performance and has been
actively negotiating a rent abatement program with its landlords. To date, the
Company has executed or obtained agreements in principle for $8 million in
annualized rent abatement under the program. In connection with this process,
the Company has elected not to renew the lease on one store in the Cleveland
market and will begin the inventory liquidation in September 2009. The Company
believes that a certain level of sales will transfer to the remaining five
stores in the region which will improve the profitability of the market overall.
Additionally, the Company has reached an agreement with a key landlord to open
two new stores in Arizona. The two new stores will open in October 2009, and are
located in the cities of Oro Valley and Goodyear. The Company believes the deal
will be measurably accretive to the Company`s 2010 cash flow. The Company did
not open or close any stores during the third quarter of fiscal 2008.

The Company`s second quarter earnings conference call will be today, August 27,
2009, at 1:30 p.m. PT. The conference call will be in a "listen-only" mode for
all participants other than the sell-side and buy-side investment professionals
who regularly follow the Company. The toll-free phone number for the call is
866-356-3095 and the access code is 30550904. Callers should dial in
approximately 15 minutes prior to the scheduled start time. A telephonic replay
will be available at 888-286-8010, Access Code: 31156788, from 4:30 p.m. PT
Thursday, August 27, 2009 to 4:30 p.m. PT on Thursday, September 3, 2009.
Investors may also access the live call or the replay over the internet at
www.streetevents.com; www.fulldisclosure.com and www.worldmarket.com. The replay
will be available approximately three hours after the live call concludes.

This press release contains "forward-looking statements" that are based on
current expectations and are subject to various risks and uncertainties, which
could cause actual results to differ materially from those forecasted. Such
"forward-looking statements" include, but are not limited to, statements
relating to our future liquidity position through fiscal 2009, our financial
guidance for the third quarter of fiscal 2009 and anticipated financial effects
of store closures and openings. The risks and uncertainties include, but are not
limited to: continued deterioration in economic conditions that affect consumer
spending; changes in the competitive environment; currency fluctuations; timely
introduction and customer acceptance of merchandising offerings; foreign and
domestic fluctuations; complications or delays in the store opening and closing
processes; interruptions in the flow of merchandise; changes in the cost of
goods and services purchased including fuel, transportation and insurance; a
material unfavorable outcome with respect to litigation, claims and assessments;
unseasonable weather; the effects associated with terrorist acts; and changes in
accounting rules and regulations. Please refer to documents on file with the
Securities and Exchange Commission for a more detailed discussion of the
Company`s risk factors. The Company does not undertake any obligation to update
its forward-looking statements.

COST PLUS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Dollars and shares in thousands, except per share amounts, unaudited)

Second Quarter
August 1, 2009 August 2, 2008

Net sales $ 183,365 100.0 % $ 210,657 100.0 %
Cost of sales and occupancy 135,362 73.8 153,835 73.0
Gross profit 48,003 26.2 56,822 27.0

Selling, general and administrative expenses 64,493 35.2 76,199 36.2
Store closure costs 329 0.2 - 0.0
Store preopening expenses - - 1,250 0.6

Loss from continuing operations, before interest and taxes (16,819 ) (9.2 ) (20,627 ) (9.8 )
Net interest expense 2,851 1.6 3,153 1.5

Loss from continuing operations before income taxes (19,670 ) (10.7 ) (23,780 ) (11.3 )
Income tax expense/(benefit) 148 0.1 (54 ) -

Net loss from continuing operations (19,818 ) (10.8 ) (23,726 ) (11.3 )

Loss from discontinued operations (945 ) (0.5 ) (2,916 ) (1.4 )

Net loss $ (20,763 ) (11.3 ) % $ (26,642 ) (12.6 ) %

Loss per diluted share from continuing operations $ (0.90 ) $ (1.07 )
Loss per diluted share from discontinued operations $ (0.04 ) $ (0.14 )
Net loss per diluted share $ (0.94 ) $ (1.21 )

Weighted average shares outstanding- diluted 22,087 22,087

New stores opened 0 7

For the Six Month Period Ended
August 1, 2009 August 2, 2008

Net sales $ 367,625 100.0 % $ 412,537 100.0 %
Cost of sales and occupancy 271,704 73.9 299,793 72.7
Gross profit 95,921 26.1 112,744 27.3

Selling, general and administrative expenses 129,006 35.1 148,421 36.0
Store closure costs 6,076 1.7 - 0.0
Store preopening expenses - - 3,144 0.8

Loss from continuing operations, before interest and taxes (39,161 ) (10.7 ) (38,821 ) (9.4 )
Net interest expense 5,687 1.5 6,168 1.5

Loss from continuing operations before income taxes (44,848 ) (12.2 ) (44,989 ) (10.9 )
Income tax expense/(benefit) 360 0.1 (645 ) (0.2 )

Net loss from continuing operations (45,208 ) (12.3 ) (44,344 ) (10.7 )

Loss from discontinued operations (17,134 ) (4.7 ) (14,290 ) (3.5 )

Net loss $ (62,342 ) (17.0 ) % $ (58,634 ) (14.2 ) %

Loss per diluted share from continuing operations $ (2.05 ) $ (2.01 )
Loss per diluted share from discontinued operations $ (0.77 ) $ (0.64 )
Net loss per diluted share $ (2.82 ) $ (2.65 )

Weighted average shares outstanding- diluted 22,087 22,087

New stores opened 0 15

COST PLUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)

August 1, 2009 August 2, 2008

ASSETS
Current assets:
Cash and cash equivalents $ 2,539 $ 3,650
Merchandise inventories 185,750 266,856
Other current assets 18,251 35,172

Total current assets 206,540 305,678

Property and equipment, net 176,155 209,654
Other assets 4,413 13,578

Total assets $ 387,108 $ 528,910

LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 52,133 $ 68,049
Accrued compensation 11,228 10,291
Current portion of revolving line of credit - 72,200
Current portion of long-term debt 849 799
Other current liabilities 35,846 39,827

Total current liabilities 100,056 191,166

Long-term portion of revolving line of credit 65,315 -
Capital lease obligations 6,866 7,610
Long-term debt - distribution center obligations 113,158 114,006
Other long-term obligations 27,016 36,341

Shareholders' equity:
Common stock 221 221
Additional paid-in capital 170,982 169,695
Retained earnings/(Accumulated deficit) (96,506 ) 9,871

Total shareholders' equity 74,697 179,787

Total liabilities and shareholders' equity $ 387,108 $ 528,910

Cost Plus, Inc.
Jane Baughman, 510-808-9119

Copyright Business Wire 2009

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