Cache Reports Second Quarter Fiscal 2008 Results

Reports Diluted EPS of $0.16, Exceeding Guidance

Maintains Third and Fourth Quarter Outlook

NEW YORK--(BUSINESS WIRE)--Cache Inc., (NASDAQ: CACH), 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 28, 2008.

“During the quarter, we also continued to emphasize expense and inventory management discipline with average inventory per store at cost down 17% at quarter end”

For the 13-week period ended June 28, 2008:

• Net sales increased 4.1% to $74.0 million compared to $71.0 million in the second quarter of 2007. Comparable store sales increased 3% following a 1% increase in the second quarter of fiscal 2007;
• Net income rose 63.9% to $2.1 million or $0.16 per diluted share from net income of $1.3 million or $0.08 per diluted share. Net income in the second quarter of fiscal 2007 included $627,000, or $0.04 per diluted share in legal settlement costs.

Thomas Reinckens, Chairman and Chief Executive Officer, commented: “We are pleased to report second quarter results that surpassed our recently raised guidance. Our strength in an ongoing difficult consumer spending environment validates the success of our merchandising and marketing strategies, including our emphasis on collection dressing, as a result of the Adrienne Victoria Designs acquisition and our improved pricing. These efforts are expected to raise sales productivity and operating margins going forward as we benefit from increases in shopping frequency, expansion of our customer base and greater leverage of expenses.”

“During the quarter, we also continued to emphasize expense and inventory management discipline with average inventory per store at cost down 17% at quarter end,” Mr. Reinckens continued. “As we look ahead, we remain positive about our near and long term outlook. July month-to-date comparable store sales are tracking to our plan and we are optimistic regarding the fall season. We believe the continuation of our strategies has us poised to gain market share and increase value for all Cache stakeholders.”

For the 26-week period ended June 28, 2008:

• Net sales increased 4.7% to $141.7 million compared to $135.4 million in the first six months of fiscal 2007. Comparable store sales increased 3% following a 1% gain in the first six months of fiscal 2007;
• Net income was $52,000 or breakeven on a per share basis and included charges of: $1.5 million or $0.11 per diluted share related to store closures and $388,000 or $0.03 per diluted share related to the previously announced management change. This compares to net income of $1.4 million or $0.09 per diluted share, including $0.04 per diluted share in legal settlement costs, in the first six months of fiscal 2007; and
• Adjusted net income for the first six months of fiscal 2008 was $1.9 million or $0.14 per diluted share and excludes store closure and management change costs. This compares to adjusted net income for the first six months of fiscal 2007 of $2.1 million or $0.12 per diluted share, which excludes costs related to the legal settlement.

Gross profit in the second quarter of fiscal 2008 was $34.2 million, or 46.2% of net sales, compared to $33.9 million, or 47.8% of net sales, in the second quarter of fiscal 2007. For the first six months of fiscal 2008, gross profit was $62.6 million, or 44.2% of net sales, compared to $62.9 million, or 46.5% of net sales, in the first six months of fiscal 2007. The decline in gross profit margin for the second quarter was primarily driven by additional costs associated with the in-house design team acquired in connection with the July 2007 acquisition of Adrienne Victoria Designs and the effect of the new pricing strategy. For the first six months of fiscal 2008 the decline in gross profit margin was primarily driven by additional costs associated with the in-house design team acquired in connection with the July 2007 acquisition of Adrienne Victoria Designs and the effect of the new pricing strategy, as well as by increased markdowns.

In total, operating expenses for the second quarter of fiscal 2008 were $31.0 million, or 41.9% of net sales, as compared to $32.6 million, or 46.0% of net sales, in the second quarter of fiscal 2007. Operating expenses in the second quarter of fiscal 2007 included $1.0 million in legal settlement costs. For the first six months of fiscal 2008, total operating expenses were $62.9 million, or 44.4% of net sales, compared to $62.1 million, or 45.9% of net sales, in the prior-year period. Operating expenses for the first six months of fiscal 2008 included a $2.3 million charge related to store closures and $616,000 in costs related to the previously announced management change. Operating expenses for the first six months of fiscal 2007 included $2.2 million in legal fees and settlement costs.

At June 28, 2008, cash and marketable securities totaled $27.4 million, after utilizing $38.9 million to fund the repurchase of 3.2 million shares since second quarter end last year. This compares to $66.0 million in cash and marketable securities at June 30, 2007. Average inventory per store, at cost decreased 17% at quarter end from the prior-year period.

A table summarizing financial results follows:

	Twenty-Six Weeks Ended					Thirteen Weeks Ended
	June 28,			June 30,		June 28,		June 30,
	2008			2007		2008		2007
	($ thousands, except for per share data, share numbers and store count)
Net sales	$	141,681		$	135,381	$	73,973	$	71,027
Operating income (loss)		(273	)		801		3,207		1,291
Store exit and management change costs		2,924		-		-		-
Legal settlement costs	-				1,015	-			1,000
Operating income before
one-time costs		2,651			1,816		3,207		2,291
Net income		52			1,428		2,105		1,284
Net income before one-time costs		1,894			2,062		2,105		1,909
Basic earnings per share	$	0.00		$	0.09	$	0.16	$	0.08
Diluted earnings per share	$	0.00		$	0.09	$	0.16	$	0.08
Per share - Store exit and management
change costs	$	0.14		-		$	-	$	-
Per share - Legal settlement costs	$	-		$	0.04	$	-	$	0.04
Diluted earnings per share - excluding
one-time costs	$	0.14		$	0.12	$	0.16	$	0.11
Basic weighted average
shares outstanding		13,443,000			16,289,000		13,320,000		16,296,000
Diluted weighted average
shares outstanding		13,462,000			16,719,000		13,357,000		16,672,000
Number of stores open at end of period		297			294		297		294

Guidance

The Company is maintaining its previous guidance for the third and fourth quarters of fiscal 2008 and increasing the low end of its 2008 fiscal year guidance.

For the third quarter of fiscal 2008, the Company is maintaining its guidance for net sales in the range of $62 million to $64 million and diluted earnings per share in the range of $0.01 to $0.02. The Company continues to expect third quarter fiscal 2008 comparable store sales to increase in the low to mid-single digit range. This compares to actual third quarter fiscal 2007 net sales of $60.6 million and diluted earnings per share of $0.01.

For the fourth quarter of fiscal 2008, the Company is maintaining its guidance for net sales in the range of $82 million to $84 million and diluted earnings per share in the range of $0.38 to $0.40. The Company continues to expect fourth quarter comparable store sales to increase in the low to mid-single digit range. This compares to actual fourth quarter fiscal 2007 net sales of $78.5 million and diluted earnings per share of $0.32.

For the full fiscal 2008 year, the Company currently estimates net sales in the range of $286 million to $290 million and diluted earnings per share on a GAAP basis in the range of $0.39 to $0.42. This guidance includes costs of $0.14 per diluted share, which were incurred during the first quarter of fiscal 2008 and related to the store closures and costs associated with a previous management change. On an adjusted basis, excluding store closing and management change costs, the Company currently expects fiscal 2008 diluted earnings per share in the range of $0.53 to $0.56. This guidance compares to actual fiscal 2007 net sales of $274.5 million and diluted earnings per share of $0.40, inclusive of $0.04 per diluted share in legal settlement costs. Adjusted diluted earnings per share for fiscal 2007 were $0.44.

Store Opening Plans

During the second quarter the Company opened 5 stores and closed 2 locations as part of its plan to improve store productivity. At quarter-end, the Company operated 297 locations. The Company expects to open approximately 8 new Cache stores during the second half of fiscal 2008 and close approximately 13 stores, thereby essentially completing its store closure plan. For the fiscal year, the Company continues to expect to open approximately 16 new Cache stores and close approximately 21 locations, ending the year with approximately 292 locations and 590,000 square feet in operation.

Conference call information

The Company also announced that it will conduct a conference call to discuss its second quarter fiscal 2008 results today, July 24, 2008 at 9:00 a.m. Eastern Daylight Time. Investors and analysts interested in participating in the call are invited to dial [phone] approximately ten minutes prior to the start of the call. The conference call will also be web-cast live at www.cache.com. A replay of this call will be available until July 31, 2008 and can be accessed by dialing [phone] and enter account number 3055 and reference conference code 291549.

About Cache, Inc.

Cache is a nationwide, mall-based specialty retailer of sophisticated sportswear and social occasion dresses targeting style-conscious women. Cache targets women between the ages of 25 and 45 who have a youthful attitude, are self-confident and fashion-conscious, and require a missy fit. We operate 296 Cache and Cache Luxe stores, primarily situated in central locations in high traffic, upscale malls in 43 states, the Virgin Islands and Puerto Rico.

CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
			June 28,			December 29,			June 30,
ASSETS			2008			2007			2007
Current assets:
Cash and equivalents		$	1,045,000		$	7,243,000		$	16,466,000
Marketable securities			26,319,000			42,887,000			49,546,000
Receivables, net			4,565,000			4,788,000			2,944,000
Inventories, net			35,042,000			30,547,000			32,215,000
Prepaid expenses and other current assets			4,465,000			2,465,000			6,734,000
	Total current assets		71,436,000			87,930,000			107,905,000
Equipment and leasehold improvements, net			46,764,000			49,298,000			49,544,000
Goodwill			10,089,000			10,089,000			0
Intangible assets, net			1,364,000			1,423,000			102,000
Other assets			382,000			385,000			355,000
	Total assets	$	130,035,000		$	149,125,000		$	157,906,000
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	10,567,000		$	10,510,000		$	10,844,000
Note payable			1,362,000			1,586,000			0
Accrued compensation			1,949,000			1,910,000			1,710,000
Accrued liabilities			9,663,000			14,252,000			9,120,000
	Total current liabilities		23,541,000			28,258,000			21,674,000
Note payable			3,753,000			4,348,000			0
Other liabilities			16,373,000			16,172,000			15,681,000
Deferred income taxes, net			99,000			83,000			1,779,000
Commitments and contingencies
STOCKHOLDERS' EQUITY
Common stock			164,000			163,000			163,000
Additional paid-in capital			46,784,000			46,136,000			45,526,000
Retained earnings			78,227,000			78,175,000			73,083,000
Treasury Stock			(38,906,000	)		(24,210,000	)		0
	Total stockholders' equity		86,269,000			100,264,000			118,772,000
	Total liabilities and stockholders' equity	$	130,035,000		$	149,125,000		$	157,906,000

CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE TWENTY SIX WEEKS ENDED
		June 28,		June 30,
		2008		2007
Net sales	$	141,681,000	$	135,381,000
Cost of sales, including occupancy and buying costs		79,074,000		72,456,000
Gross profit		62,607,000		62,925,000
Costs and expenses
Store operating expenses		48,701,000		49,631,000
General and administrative expenses		11,871,000		12,493,000
Store exit costs		2,308,000		0
		62,880,000		62,124,000
Operating income (loss)		(273,000)		801,000
Other income (expense):
Interest expense		(131,000)		0
Interest income		487,000		1,484,000
Income before income taxes		83,000		2,285,000
Income tax provision		31,000		857,000
Net income	$	52,000	$	1,428,000
Basic earnings per share		$0.00		$0.09
Diluted earnings per share		$0.00		$0.09
Basic weighted average shares outstanding		13,443,000		16,289,000
Diluted weighted average shares outstanding		13,462,000		16,719,000

CACHE, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
FOR THE THIRTEEN WEEKS ENDED
		June 28,		June 30,
		2008		2007
Net sales	$	73,973,000	$	71,027,000
Cost of sales, including occupancy and buying costs		39,781,000		37,092,000
Gross profit		34,192,000		33,935,000
Costs and expenses
Store operating expenses		24,783,000		25,616,000
General and administrative expenses		6,202,000		7,028,000
Store exit costs		0		0
		30,985,000		32,644,000
Operating income		3,207,000		1,291,000
Other income (expense):
Interest expense		(63,000)		0
Interest income		197,000		758,000
Income before income taxes		3,341,000		2,049,000
Income tax provision		1,236,000		765,000
Net income	$	2,105,000	$	1,284,000
Basic earnings per share		$0.16		$0.08
Diluted earnings per share		$0.16		$0.08
Basic weighted average shares outstanding		13,320,000		16,296,000
Diluted weighted average shares outstanding		13,357,000		16,672,000