Cache Reports Second Quarter Fiscal 2012 Results

Cache, Inc.,

, a specialty chain of women's apparel stores, reported results for the thirteen (“second quarter”) and twenty-six week periods (“first six months”) ended June 30, 2012. For the 13-week period ended June 30, 2012: Net sales increased 2.3% to $61.6 million from $60.3 million in the second quarter of fiscal 2011. Comparable store sales increased 4.7%, which compares to an increase of 6.0% in the second quarter of fiscal 2011; Gross profit decreased 4.1% to $26.4 million, or 42.8% of net sales, from $27.5 million, or 45.7% of net sales, in the second quarter of fiscal 2011;

Operating income totaled $1.7 million, as compared to $4.2 million in the second quarter of fiscal 2011; and

Net income totaled $1.0 million, or $0.08 per diluted share, as compared to net income of $2.8 million or $0.22 per diluted share in the second quarter of fiscal 2011. Thomas Reinckens, Chairman and Chief Executive Officer, commented: “Our second quarter results included positive comparable store sales, ongoing strength in dresses, and a more than doubling of e-commerce sales. However, earnings were disappointing, driven by a weak response to our sportswear offerings. We have taken the appropriate actions necessary to clear seasonal inventory, which is expected to negatively impact margins in the third quarter. That said, we expect to continue our positive momentum in dresses and generate improvement in our sportswear sales, as we infuse a better balance of color and neutrals to our offerings. This coupled with our heightened focus on expense discipline that includes $1.8 million in expected annual savings will assist us in improving our performance.” For the 26-week period ended June 30, 2012: Net sales increased 4.7% to $117.6 million from $112.4 million in the first six months of fiscal 2011. Comparable store sales increased 6.9%, as compared to a increase of 6.8% in the first six months of fiscal 2011;

Gross profit decreased 1.7% to $48.6 million, or 41.3% of net sales from $49.4 million, or 44.0% of net sales, in the first six months of fiscal 2011;

Operating loss totaled $346,000, as compared to an operating income of $2.9 million in the first six months of fiscal 2011; and

Net loss was $177,000 or ($0.01) per diluted share, as compared to a net income of $2.0 million, or $0.16 per diluted share in the first six months of fiscal 2011. Gross profit for the second quarter of fiscal 2012 was $26.4 million, or 42.8% of net sales, compared to $27.5 million, or 45.7% of net sales, in the second quarter of fiscal 2011. For the first six months of fiscal 2012, gross profit was $48.6 million, or 41.3% of net sales, compared to $49.4 million, or 44.0% of net sales in the first six months of fiscal 2011. The decrease in gross margin for the second quarter and first six months of fiscal 2012 was primarily driven by an increase in markdowns and internet fulfillment and delivery expenses, partially offset by an increase in initial mark-up and a decline in occupancy costs as a percentage of net sales, as compared to the prior year. In total, operating expenses for the second quarter of fiscal 2012 were $24.7 million, or 40.0% of net sales, as compared to $23.4 million, or 38.8% of net sales, in the second quarter of fiscal 2011. For the first six months of fiscal 2012, operating expenses were $48.9 million, or 41.6% of net sales, compared to $46.5 million, or 41.4% of net sales, in the first six months of fiscal 2011. The increase in operating expenses for the second quarter and first six months of fiscal 2012 were driven by increased marketing and e-commerce related expense. In addition, as compared to last year, professional fees increased primarily due to a $450,000 legal fee reimbursement that positively impacted last year's second quarter. At June 30, 2012, cash and marketable securities totaled $24.4 million, as compared to $27.3 million in cash and marketable securities at July 2, 2011. Total inventory at cost increased 21.3% at quarter end from the prior year period.