Cost Plus, Inc. Reports Second Quarter Results and Provides Third Quarter Financial Guidance

Oakland, CA — August 17, 2006 — Cost Plus, Inc. (NASDAQ: CPWM) today announced financial results for its second quarter ended July 29, 2006 and provided financial guidance for its fiscal third quarter and full fiscal year.

Net loss for the second quarter of fiscal 2006 was $11.3 million versus net income of $1.5 million last year. Net loss per diluted share was $0.51 for the second quarter compared to the prior year’s second quarter net income of $0.07 per diluted share. The net loss included $0.17 per diluted share due to a previously announced markdown charge taken to lower retail pricing on certain categories of home furnishings merchandise that the Company desires to sell through.

During the second quarter, total revenue increased 6.2% to $215.3 million from $202.8 million last year. Same store sales for the quarter decreased 3.2% compared to a 1.7% decrease last year. Year-to-date, total revenue was $428.2 million, a 6.3% increase from $402.8 million for the same period last year, with same store sales decreasing 3.7% compared to a decrease of 1.8% last year.

Barry Feld, President and CEO, commented: “As we previously announced, both our total and same store sales results were within our guidance range. While we are not happy with the losses this quarter, we believe we are making the right strategic moves to position the company for long-term growth and success.”

The Company opened two new stores in the quarter. As of August 17, 2006, the Company operated 276 stores in 34 states, compared to 248 stores in 31 states at the same time last year.

Financial guidance for the third quarter of fiscal 2006 is in the range of a loss of $0.38 per diluted share to a loss of $0.46 per diluted share. The following are the major assumptions contained in the guidance:

  • Opening 11 new stores and closing 2 stores versus opening 11 in the third quarter last year.
  • Same store sales between a negative 3% and a positive 1% compared to a negative 4.7% in the third quarter last year.
  • Total sales between $213 million and $221 million.
  • Gross profit rate between 31.7% and 32.0% compared to 33.3% last year.
  • SG&A rate between 36.0% and 37.1%, versus 33.2% last year.
  • Pre-tax loss between $13.6 million and $16.6 million versus a pre-tax loss of $4.4 million in the third quarter last year.
  • An income tax rate of 39.0%, the same as last year.
  • Net loss between $8.3 million and $10.1 million versus a net loss of $2.7 million in the third quarter last year.
  • Weighted average diluted shares outstanding of 22.1 million versus 22.0 million last year.

Earnings guidance for the fiscal year is in the range of $0.21 to $0.40 per diluted share and is based on a same-store sales range of a negative 3% to flat.

The Company’s second quarter earnings conference call will be today, August 17, 2006, at 1:30 p.m. PT. It 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. Phone numbers for the call are (415) 537-1985 or (212) 676-5400. Callers should dial in approximately 15 minutes prior to the scheduled start time. A telephonic replay will be available at (402) 977-9140, Access Code: 21300066, from 3:30 p.m. PT Thursday to 3:30 p.m. PT on Friday, August 18, 2006. Investors may also access the live call or the replay over the internet at www.worldmarket.com. The replay will be available approximately one hour after the live call concludes.

The above statements relating to anticipated third quarter and fiscal 2006 financial results are “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 risk factors include, but are not limited to: changes in economic conditions that affect consumer spending; changes in the competitive environment; 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; 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 July 29, 2006 July 30, 2005 Net sales $ 215,275 100.0 % $ 202,766 100.0 % Cost of sales and occupancy 156,726 72.8 133,545 65.9 Gross profit 58,549 27.2 69,221 34.1 Selling, general and administrative expenses 74,554 34.6 63,152 31.1 Store preopening expenses 738 0.3 2,296 1.1 Income (loss) from operations (16,743) (7.8) 3,773 1.9 Net interest expense 1,517 0.7 1,381 0.7 Income (loss) before income taxes (18,260) (8.5) 2,392 1.2 Income tax expense (benefit) (7,008) (3.3) 874 0.4 Net income (loss) $ (11,252) (5.2) % $ 1,518 0.7 % Net income (loss) per share – diluted $ (0.51) $ 0.07 Weighted average shares outstanding- diluted 22,065 22,135 New stores opened 2 10 For the Six Month Period Ended July 29, 2006 July 30, 2005 Net sales $ 428,239 100.0 % $ 402,789 100.0 % Cost of sales and occupancy 306,383 71.5 266,849 66.3 Gross profit 121,856 28.5 135,940 33.7 Selling, general and administrative expenses 143,261 33.5 128,309 31.9 Store preopening expenses 2,263 0.5 3,357 0.8 Income (loss) from operations (23,668) (5.5) 4,274 1.1 Net interest expense 2,579 0.6 2,107 0.5 Income (loss) before income taxes (26,247) (6.1) 2,167 0.5 Income tax expense (benefit) (10,203) (2.4) 787 0.2 Net income (loss) $ (16,044) (3.7) % $ 1,380 0.3 % Net income (loss) per share – diluted $ (0.73) $ 0.06 Weighted average shares outstanding- diluted 22,063 22,126 New stores opened 9 15
COST PLUS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands, unaudited)
July 29, 2006 July 30, 2005
ASSETS
Current assets:
Cash and cash equivalents $ 2,905 $ 3,564
Merchandise inventories 276,002 277,531
Other current assets 33,267 18,898
Total current assets 312,174 299,993
Property and equipment, net 203,505 191,830
Goodwill 4,178 4,178
Other assets 16,161 12,570
Total assets $ 536,018 $ 508,571
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 63,053 $ 47,631
Accrued compensation 12,357 11,659
Short-term borrowings 11,622 26,206
Other current liabilities 26,308 24,903
Total current liabilities 113,340 110,399
Capital lease obligations 11,455 13,099
Long-term debt 67,791 52,916
Other long-term obligations 41,372 35,886
Shareholders’ equity:
Common stock 221 220
Additional paid-in capital 165,372 163,252
Retained earnings 136,397 133,589
Accumulated other comprehensive income (loss) 70 (790)
Total shareholders’ equity 302,060 296,271
Total liabilities and shareholders’ equity $ 536,018 $ 508,571

Contact:
Tom Willardson
(510)808-9119