Deb Shops Reports First Quarter Results

-Reiterates Fiscal 2007 Guidance of $1.85 to $1.90 Per Diluted Share- 


PHILADELPHIA, May 18  /PRNewswire-FirstCall/ -- Deb Shops, Inc. (NASDAQ:DEBS), a leading teen apparel retailer, today reported financial results for the first quarter ended April 30, 2006.

For the first quarter of fiscal 2007, net sales increased 5.1% to $81.5 million compared to $77.5 million in the first quarter a year ago.  Gross profit, which is net of buying and occupancy costs, was $22.9 million resulting in a gross margin of 28.1% for the period.  This compares to gross profit of $21.8 million and a 28.1% gross margin in the first quarter of fiscal 2006. First quarter net income was $2.7 million compared to $2.8 million in the year ago period, while diluted earnings per share was $0.19 compared to $0.20 in last year's first quarter.

As of April 30, 2006, the Company had $118.9 million in cash and marketable securities, shareholders' equity of $132.7 million, and no debt.

Marvin Rounick, President and CEO of Deb Shops, stated, "During the first quarter, we were able to perform on-plan and report results that were in-line with our internal projections. Sales were driven by the opening of new stores and the continued expansion of our plus-size business.  We opened six new stores in the first quarter and we remain on track for net store growth of between 15 to 20 locations in fiscal 2007 compared to an average annual net store growth of seven locations over the past five years. As we approach the upcoming summer and back-to-school selling seasons, we are confident in our product assortments and merchandising strategy."

During the first quarter of fiscal 2007, Deb Shops opened six new stores, remodeled two existing locations and closed three stores.  The Company also added a net of seven plus-size departments and as of April 30, 2006, operated plus-size departments in 170 Deb Shops stores.

Barry Susson, CFO of Deb Shops, added, "We are pleased with our start to the new fiscal year, particularly given the current economic environment and our strong comparable store sales performance in last year's first quarter. Importantly, we continued to return value to our shareholders through our quarterly dividend payout, and still ended the period with $118.9 million in cash and marketable securities on our balance sheet. We move ahead focused on achieving our strategic goals and committed to delivering long-term growth and increased profitability."

Based on management's current outlook, Deb Shops is reiterating its fiscal 2007 guidance of sales in the range of $343 million to $348 million with a corresponding fully diluted earnings range of between $1.85 and $1.90 per share. These amounts are based on a projected low single digit comparable store sales increase and net new store growth of between 15 and 20 locations.

Deb Shops, Inc. is a national specialty retailer of fashionable apparel, shoes and accessories for juniors in both regular and plus sizes.  The Company currently operates 332 specialty apparel stores in 42 states under the DEB and Tops 'n Bottoms names.

The Company has made in this release, and from time to time may otherwise make, "forward-looking statements" (as that term is defined under federal securities laws) concerning the Company's future operations, performance, profitability, revenues, expenses, earnings and financial condition.  This release includes, in particular, forward-looking statements regarding expectations of future performance, store openings and closings and other matters.  Such forward-looking statements are subject to various risks and uncertainties.  Actual results could differ materially from those currently anticipated due to a number of factors.  Such factors may include, but are not limited to, the Company's ability to improve or maintain sales and margins, respond to changes in fashion, find suitable retail locations and attract and retain key management personnel.  Such factors may also include other risks and uncertainties detailed in the Company's filings with the Securities and Exchange Commission, including the Company's Annual Report on Form 10-K for the fiscal year ended January 31, 2006.  The Company assumes no obligation to update or revise its forward-looking statements even if experience or future changes make it clear that any projected results expressed or implied therein will not be realized.

  Income Statement Highlights (Unaudited)
                                        Three Months Ended
                                             April 30,
                                         2006          2005

  Net sales                          $81,457,556   $77,484,747
  Cost of sales, including
   buying and occupancy costs         58,573,389    55,682,817
  Gross profit                        22,884,167    21,801,930

  Operating expenses:
    Selling and administrative        18,255,023    17,095,260
    Depreciation and amortization      1,264,148     1,366,807
                                      19,519,171    18,462,067

  Operating income                     3,364,996     3,339,863
  Other income, principally interest     933,074     1,048,455

  Income before income taxes           4,298,070     4,388,318
  Income tax provision                 1,560,000     1,628,000

  Net income                          $2,738,070    $2,760,318

  Net income per common share
      Basic                                $0.19         $0.20
      Diluted                              $0.19         $0.20

  Weighted average number of
   common shares outstanding
      Basic                           14,323,392    13,781,578
      Diluted                         14,352,326    13,948,925

  EBITDA(1)                           $4,629,144    $4,706,670


  Balance Sheet Highlights (Unaudited)
                                        April 30, 2006   April 30, 2005

  Cash and cash equivalents                $27,280,463      $32,868,176
  Marketable securities                    $91,500,000     $147,100,000
  Merchandise inventories                  $25,657,734      $25,476,107
  Total current assets                    $149,301,235     $209,189,345
  Property, plant and equipment, net       $23,873,163      $22,700,640
  Total assets                            $182,667,465     $241,024,144
  Total current liabilities                $38,208,140      $38,000,013
  Deferred lease credits                   $11,768,843      $10,783,087
  Total liabilities                        $49,976,983      $48,783,100
  Shareholders' equity                    $132,690,482     $192,241,044


               (1)EBITDA Reconciliation (Unaudited)

                                             Three Months Ended
                                                  April 30,
                                              2006         2005

               Net income                 $2,738,070   $2,760,318
               Income tax provision        1,560,000    1,628,000
               Depreciation expense        1,264,148    1,366,807
               Other income, principally
                interest                    (933,074)  (1,048,455)
               EBITDA                     $4,629,144   $4,706,670

  (1) EBITDA is a financial measure that is not recognized under accounting
      principles generally accepted in the United States (US GAAP).  The
      Company believes EBITDA provides a meaningful measure of operating
      performance. As required, the Company has presented the reconciliation
      of net income, a US GAAP financial measure, to EBITDA.


DATASOURCE: Deb Shops, Inc.



CONTACT:  Barry Susson, Chief Financial Officer, Deb Shops, Inc.,

[phone]; or Brendon Frey or Tom Ryan, Integrated Corporate Relations,

[phone], for Deb Shops



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

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