Vermont Teddy Bear Co.(R) Reports 44% Increase in Q2 Revenues:

Vermont Teddy Bear Co.(R) Reports 44% Increase in Q2 Revenues:
Valentine's Day orders up 27% 


SHELBURNE, Vt., Feb. 17  /PRNewswire-FirstCall/ -- The Vermont Teddy Bear
Company(R)  today reported net revenues of $13.4 million for the three months
endedDecember 31, 2003, an increase of approximately 44 percent as compared to
net revenues of $9.3 million for the same period last year. Net income available
to common stockholders for this second quarter was $372,000, or $.07 per diluted
common share, ascompared to net income available to common stockholders of
$81,000, or $.02 per diluted share, for the same quarter last year.

Revenues in the first half of fiscal year 2004 increased approximately 28
percent to $18.4 million from $14.4 million in thesame six-month period last
year. The Company reported net income available to common stockholders of
$189,000 in the first half of fiscal year 2004, or $.04 per diluted common
share, as compared to a net loss of $5,000, or ($.00) per diluted common share,
reported for the first half of last year.

The increase in net revenues in the second quarter is primarily attributable to
revenues contributed by the Calyx & Corolla floral delivery business segment and
increased revenues in the PajamaGram segment.These increases were partially
offset by decreased revenue in the Company's BearGram segment. The Company
acquired the net assets and the business of Calyx on August 29, 2003.

Total orders for the first 14 days of February, the Company's Valentine's Day
selling season, increased 27 percent. The Company shipped a total of
approximately 140,000 Valentine's Day orders this year versus 110,000 last year.
The 30,000 additional orders included approximately 12,500 orders in the Calyx
segment. The Company also received approximately 10,000 more BearGram orders and
7,500 more PajamaGram orders for Valentine's Day this year as compared to last.

As in past years, the Company came to the rescue of its beloved male last minute
customer "Late Jack," by takingnearly 1000 Bear-Gram orders after 5:00 pm on
February 13th this year. The Company was able to extend its Valentine's Day
delivery guarantee to all orders placed up until 11:30 PM the night before.

"As we build on the vision of becoming the premier gift company and expand our
gift product offering under multiple standalone brands, we are re- allocating
our advertising expenditures according to the seasonal demand for each of our
product categories," said CEO Elisabeth Robert. "We emphasize Calyx floral
arrangements and plants at Christmas, traditionally Calyx's biggest selling
season, and focus on teddy bears with more advertising dollars at Valentine's
Day, seeking to generate the greatest overall return on our advertising
investment throughout the year. As a result, our marketing and selling costs
decreased as a percentage of net revenues again in our second quarter. Seeking
to leverage our operating infrastructure, we are also successfully leveling
sales throughout the year. Thus far this year, we have increased sales
proportionately more at Christmas than at Valentine's Day, which has
traditionally been the Company's largest selling season."

Consolidated gross margin in the three months ended December 31, 2003 increased
to approximately $7.7 million from $5.7 million in the comparable period last
year. In the quarter, the gross margin dollar contribution from the Calyx
segment and gross margin dollar increases in the PajamaGram segment more than
offset decreases in BearGram and Retail margins resulting from lower sales in
these segments. Gross margin as a percentage of net revenues decreased to 57.1
percent in the second quarter from 61.1 percent in the same period last year.
The Company achieved gross margin percentage point increases of 9.8 points in
the PajamaGram segment, 15.1 points in the TastyGram segment, and 5.6 points in
the Corporate/Wholesale segment as a result of its efforts to lower unit costs
and change the product mix in each of these segments. These increases were
offset by a 1.1 point decrease in BearGram margin attributed to higher unit bear
costs associated with reduced throughput in bear production as the Company
adjusted to lower sales volume. The 50.6 percent gross margin in the newly
acquired Calyx & Corolla segment, which is significantly less than the Company's
overall gross margin prior to the acquisition, also contributed to the decrease
in the Company's consolidated gross margin as a percentage of net revenues in
the quarter.

Marketing and selling expenses increased to approximately $5.2 million in the
second quarter of fiscal 2004 from $4.1 million in the second quarter of last
year due to the addition of catalog and merchandising costs associated with the
recently acquired Calyx segment and increased PajamaGram radio and catalog
advertising costs. Offsetting these increases were reduced marketing and selling
costs in the BearGram segment, as the Company curtailed less profitable
advertising in the quarter. The Company also reduced marketing and selling
expenditures in the Retail, Corporate/Wholesale and TastyGram segments in the
quarter. As a result, marketing and selling costs as a percentage of net
revenues decreased to 38.9 percent in the second quarter of fiscal 2004 from
44.3 percent in the quarter last year.

General and Administrative expenses increased to $1.5 million for the three
month period ended December 31, 2001 from $1.2 million as the result of expenses
attributed to Calyx. However, G&A decreased to 11.1 percent of net revenues from
13.4 percent in the same period last year.

"The prime driver of our increased profitability in the second quarter is the
cost savings we have already achieved in the Calyx segment by integrating their
operations into our own," Robert continued. "These savings were achieved even as
we continued to incur one-time expenses associated with relocating operations
and retaining certain Calyx employees temporarily to help with the transition of
operations to Vermont."

The expenses reported for the relocation of Calyx operations in September that
are included in the Company's financial results in the six months ended December
31, 2003 total approximately $130,000. Also included in the results for the
fiscal year to date are wage and severance costs of approximately $187,000 for
Calyx employees at the Vero Beach location whose positions were eliminated in
October and November. Reduced wage costs in Vero Beach may be partially offset
by additions to personnel at the Shelburne, Vermont location.

The Company purchased the net assets and the business of Calyx & Corolla from
Equity Resource Partners, LLC on August 29, 2003. In its fiscal year ended June
30, 2003, Calyx & Corolla generated approximately $16.8 million of revenues. The
purchase price consisted of a combination of cash and stock worth a total of
$3.7 million along with the assumption of certain working capital liabilities.
The Company financed the $1.2 million cash portion of the purchase price with a
$1 million five-year term loan. The remaining $2.5 million of the purchase price
was paid by the issuance of 250 shares of the Company's Series D Convertible
Redeemable Preferred Stock at a price of $10,000 per share. The preferred shares
are convertible into the Company's common stock at a price of $3.53 per common
share and have voting rights on an as converted basis.

The Company has completed the first phase of its plan to integrate certain
operations of Calyx & Corolla into its operations in Shelburne, VT. All of
Calyx's California operations were eliminated in September when inventory and
order processing and fulfillment operations, and related information technology
and equipment were relocated to Vermont. Also in September, the Company
terminated Calyx's contract with a third party call center facility and moved
all call center operations to the Company's existing call center facilities in
Vermont. Since September, the Company has successfully transitioned Calyx's
Florida based information technology, accounting and finance, and human
resources functions to Vermont, leaving only the merchandising and brand related
marketing functions in the downsized Vero Beach, Florida offices.

A Vermont Teddy Bear Company Bear-Gram gift is a popular alternative to sending
flowers.Each Bear-Gram gift includes a customized Vermont Teddy Bear
accompanied by a personal greeting card and candy treat, all packaged in a
colorful gift box with an air hole.  Orders are placed by calling 1-800-829-
BEAR or by shopping at http://www.vermontteddybear.com/.

The PajamaGram Company is a gift delivery service where customers can pamper
their loved ones by sending pajamas and spa products in luxurious packaging by
calling 1-800-GIVE-PJS or shopping at http://www.pajamagram.com/.

The TastyGram Company specializes in the delivery of creatively packaged,
deliciously presented gourmet foods and sweets by calling 1-800-82-TASTY or
shopping at http://www.tastygram.com/

Calyx & Corolla delivers premium direct-from-the-grower floral gifts through its
catalog, by phone at 1-800-800-7788 or online at
http://www.calyxandcorolla.com/.

The foregoing can be interpreted as including forward-looking statements under
the Private Securities Litigation Reform Act of 1995.  Actual future results may
differ materially from those suggested by the statements above.

  Contact:
   Nicole L'Huillier
   802-985-1362
   



                     THE VERMONT TEDDY BEAR CO., INC.
               Condensed Consolidated Statements of Income
             For the Three and Six Months Ended December 31,
                              2003 and 2002
                               (Unaudited)

                          Three Months Ended           Six Months Ended
                      Dec 31, 2003 Dec 31, 2002  Dec 31, 2003  Dec 31, 2002

     Net Revenues      $13,410,319   $9,290,099   $18,389,971   $14,374,035
     Cost of Goods
      Sold               5,746,506    3,615,253     7,964,033     5,567,508
        Gross Profit     7,663,813    5,674,846    10,425,938     8,806,527

     Operating
      Expenses:
        Marketing and
         Selling
         Expenses        5,218,754    4,114,216     6,999,618     6,171,029
        General and
         Administrative
         Expenses        1,484,051    1,247,972     2,556,981     2,329,321
                         6,702,805    5,362,188     9,556,599     8,500,350
        Operating
         Income            961,008      312,658       869,339       306,177
     Interest Income         5,735       20,383      17,760        83,845
     Interest Expense     (184,069)    (143,185)     (337,305)     (277,476)
     Other Income            1,754        4,804         2,242         5,729
        Income Before
         Income Taxes      784,428      194,660       552,036       118,275
     Income Tax
      Provision           (356,204)     (77,864)     (261,673)      (47,310)
        Net Income         428,224      116,796       290,363        70,965
     Preferred Stock
      Dividends            (51,816)     (22,003)      (82,859)      (49,077)
     Accretion of
      Original Issue
      Discount              (4,530)     (13,623)      (18,153)      (27,246)
     Net Income(Loss)
      Available to
      Common
      Stockholders        $371,878      $81,170 $189,351       $(5,358)

     Basic Net Income
      Per Common
      Share                  $0.08        $0.02         $0.04        ($0.00)

     Diluted Net
      Income Per
      Common Share           $0.07        $0.02         $0.04         $0.00

     Weighted Average
      Number of
      Shares
      Outstanding        4,902,902    5,275,566     4,883,728     6,067,582

     Weighted Average
      Number of
      Diluted
       Common Shares
        Outstanding      6,243,958    5,851,0645,971,473     7,012,306



                          Condensed Consolidated Balance Sheet Information

                                       December 31,  June 30,  December 31,
                                          2003        2003        2002
                                       (unaudited)             (unaudited)

        Cash and Cash Equivalents       $4,188,451  $5,168,177  $2,877,199
        Current Assets                  13,001,446  12,338,471  10,224,121
        Total Assets     27,242,929  21,022,425  19,475,173

        Current Liabilities              9,163,805   6,109,936   5,827,605
        Long Term Debt                   6,955,070   6,613,847   7,098,625
        Total Liabilities               16,304,070  12,861,127  13,131,324
        Series C Preferred                  93,042     164,889     137,643
        Series D Preferred               2,510,616           0           0

        Stockholders'  Equity            8,335,201   7,996,409   6,206,206


DATASOURCE: The Vermont Teddy Bear Company(R)



CONTACT: Nicole L'Huillier of The Vermont Teddy Bear Company(R), +1-802-

985-1362, 



Web site:  http://www.vermontteddybear.com/

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