Big Dog Holdings, Inc. Announces Third Quarter 2006 Financial Results

SANTA BARBARA, CA -- (MARKET WIRE) -- November 2, 2006 -- Big Dog Holdings, Inc. (NASDAQ: BDOG) (www.bigdogs.com) (www.thewalkingcompany.com), a developer and retailer of branded, lifestyle consumer products, today reported the financial results for the third quarter ended September 30, 2006.

For the quarter ended September 30, 2006, consolidated net sales were $54,127,000 as compared with $44,909,000 in the third quarter 2005. Our consolidated net sales increased 20.5%, primarily due to the addition of 53 new The Walking Company ("TWC") stores, including 35 stores acquired from Steve's Shoes in January 2006. The Company had a total of 297 stores opened (155 Big Dog stores and 139 TWC stores) at the end of September 30, 2006, as compared to 261 stores last year (175 Big Dogs stores and 86 TWC stores as of September 30, 2005). Comparative retail store sales increased 3.0% for the third quarter 2006 (11.5% increase for TWC, offset by a 3.4% decline for Big Dogs). Consolidated gross profit increased to $28,982,000 in the third quarter 2006 as compared with $25,286,000 in the third quarter 2005. The overall increase in consolidated gross profit is the result of increased sales for TWC, as well as increased margin contributions from TWC which increased to 51.3% compared to 50.9% last year. Big Dogs' gross margin for the period decreased to 56.4%, as compared to last year's margin of 60.4%.

Consolidated operating expenses in the third quarter 2006 were $27,656,000, or 51.1% of consolidated net sales, compared to $22,262,000 or 49.6% in 2005. Consolidated EBITDA for the third quarter 2006 was $2,995,000, compared to $4,026,000 for the third quarter 2005. The increase in operating expenses as a percentage of sales, and the decrease in EBITDA, are attributable to the reduction in Big Dog's revenue and contribution, the building of our corporate overhead structure for anticipated future growth of TWC, as well as continued turnaround and integration of the Steve's Shoes operations into TWC. As a result, the fully diluted net income per share decreased to $.05 per share as compared with $.18 per share last year.

Andrew Feshbach, Chief Executive Officer, stated, "As expected, we experienced a decline in income this quarter. However we are pleased with our progress for TWC in several areas: (1) We had projected that it would take until September to turnaround the stores acquired out of bankruptcy from Steve's Shoes. While the turnaround is still ongoing, we are pleased to report a positive comparative store sales trend for those stores in September (although not included in our reported comparative stores sales for the stores opened for 12 months). (2) The stores acquired from Footworks in the 3rd quarter of 2005 are now fully integrated into TWC and achieved comparable store sales increases in September. (3) We have begun some operations at our new distribution center in North Carolina and we are on track to be fully transitioned from the Los Angeles operations by January 2007. (4) We opened 6 new TWC stores this quarter and are underway to open another 10 stores in the 4th quarter, ending the year at approximately 149 stores.

Andrew Feshbach further stated, "In regard to business at TWC, we achieved strong comparative stores sales increases on improved margins this last quarter, and our new store openings as a whole are performing better than our sales projections. We are optimistic about the 4th quarter and our results to date are ahead of those achieved in the 3rd quarter. In regard to business at Big Dogs, we previously noted softer sales at outlet malls and took a more promotional approach to maintain a small sales decrease for the third quarter. We view that the 4th quarter will be similar to the 3rd quarter in this respect."

Today's Conference Call

Today the company will host a conference call at 1:30 p.m. PST to discuss financial results for the Quarter Ended September 30, 2006. Dial in information is as follows: U.S. Toll Free: 1-800-434-1335. Participant code (to be given to the operator): 51754981#. In the event you are unable to attend, a recordable copy will be available two (2) hours after the call has ended. Dial in information to listen to the recorded call is as follows: 1-800-750-4065; Participant code: 524593#.

Big Dog Holdings, Inc. consists of Big Dogs and The Walking Company. Big Dogs develops, markets and retails a branded, lifestyle collection of unique, high-quality, popular-priced consumer products, including activewear, casual sportswear, accessories and gifts. The BIG DOGS® brand image is one of quality, value and fun. The BIG DOGS® brand is designed to appeal to people of all ages and demographics, particularly baby boomers and their kids, big and tall customers, and pet owners. In addition to its 155 retail stores, Big Dogs markets its products through its catalog, internet and corporate sales accounts. The Walking Company is a leading independent specialty retailer of high quality, technically designed comfort shoes and accessories that features premium brands such as ECCO, Mephisto, Dansko, Birkenstock and Merrell among many others. These products have particular appeal to one of the largest and most rapidly growing demographics in the nation. The Walking Company operates 142 stores in premium malls across the nation.

Safe Harbor Statement Under the Private Securities Litigation Reform Act of 1995 -- With the exception of historical information, the matters discussed in this press release are forward-looking statements that involve a number of risks and uncertainties. The actual future sales and other results of the Company could differ significantly from those statements. Further information on the Company's risk factors is contained in the Company's quarterly and annual reports as filed with the Securities and Exchange Commission.

                  BIG DOG HOLDINGS, INC. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS
                                (Unaudited)


                                                        September 30,
                                                ---------------------------
                                                    2006          2005
                                                ------------- -------------
                                  ASSETS
CURRENT ASSETS:
 Cash and cash equivalents                      $     949,000 $     390,000
 Receivables, net                                   1,623,000       529,000
 Inventories                                       71,329,000    58,573,000
 Prepaid expenses and other current assets          3,774,000     1,478,000
 Deferred income taxes                              2,914,000     1,923,000
                                                ------------- -------------
   Total current assets                            80,589,000    62,893,000
PROPERTY AND EQUIPMENT, Net                        17,811,000    10,756,000
GOODWILL AND INTANGIBLE ASSETS, Net                 7,343,000     7,811,000
DEFERRED INCOME TAXES                               2,072,000     1,613,000
OTHER ASSETS                                          395,000       360,000
                                                ------------- -------------
 TOTAL                                          $ 108,210,000 $  83,433,000
                                                ============= =============

                    LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
 Short-term borrowings                          $  31,951,000 $  12,191,000
 Current portion of long-term debt                  1,797,000     1,616,000
 Accounts payable                                  17,749,000    14,577,000
 Income taxes payable                                  41,000     1,006,000
 Accrued expenses and other current liabilities     5,063,000     4,533,000
                                                ------------- -------------
   Total current liabilities                       56,601,000    33,923,000
NOTES PAYABLE                                       2,996,000     4,736,000
CAPITAL LEASE OBLIGATIONS                               2,000        83,000
DEFERRED RENT AND LEASE INCENTIVES                  2,783,000     1,376,000
DEFERRED GAIN ON SALE-LEASEBACK                       156,000       208,000
                                                ------------- -------------
 Total liabilities                                 62,538,000    40,326,000
STOCKHOLDERS' EQUITY                               45,672,000    43,107,000
                                                ------------- -------------
 TOTAL                                          $ 108,210,000 $  83,433,000
                                                ============= =============



                  BIG DOG HOLDINGS, INC. AND SUBSIDIARIES
                  CONSOLIDATED STATEMENTS OF OPERATIONS
                                (Unaudited)


                      Three Months Ended            Nine Months Ended
                         September 30,                September 30,
                ----------------------------  ----------------------------
                    2006           2005           2006           2005
                -------------  -------------  -------------  -------------

NET SALES       $  54,127,000  $  44,909,000  $ 145,975,000  $ 119,695,000
COST OF GOODS
 SOLD              25,145,000     19,623,000     67,513,000     53,502,000
                -------------  -------------  -------------  -------------
GROSS PROFIT       28,982,000     25,286,000     78,462,000     66,193,000
                -------------  -------------  -------------  -------------
OPERATING
 EXPENSES:
  Selling,
   marketing and
   distribution    23,945,000     19,168,000     69,695,000     55,052,000
  General and
   administrative   2,042,000      2,092,000      6,164,000      5,909,000
  Depreciation
   and
   amortization     1,669,000      1,002,000      4,526,000      2,924,000
                -------------  -------------  -------------  -------------
    Total
     operating
     expenses      27,656,000     22,262,000     80,385,000     63,885,000
                -------------  -------------  -------------  -------------
INCOME (LOSS)
 FROM
 OPERATIONS         1,326,000      3,024,000     (1,923,000)     2,308,000
INTEREST INCOME         2,000          1,000          6,000         42,000
INTEREST
 EXPENSE             (573,000)      (170,000)    (1,358,000)      (618,000)
                -------------  -------------  -------------  -------------
INCOME (LOSS)
 BEFORE
 PROVISION
 FOR (BENEFIT
 FROM) INCOME
 TAXES                755,000      2,855,000     (3,275,000)     1,732,000
PROVISION FOR
 (BENEFIT FROM)
 INCOME TAXES         284,000      1,085,000     (1,227,000)       658,000
                -------------  -------------  -------------  -------------
NET INCOME
 (LOSS)         $     471,000  $   1,770,000  $  (2,048,000) $   1,074,000
                =============  =============  =============  =============
NET INCOME
 (LOSS) PER
 SHARE
  BASIC         $        0.05  $        0.19  $       (0.22) $        0.12
                =============  =============  =============  =============
  DILUTED       $        0.05  $        0.18  $       (0.22) $        0.11
                =============  =============  =============  =============

WEIGHTED AVERAGE SHARES OUTSTANDING:

  BASIC             9,211,000      9,141,000      9,159,000      9,169,000
                =============  =============  =============  =============
  DILUTED          10,331,000      9,680,000      9,159,000      9,736,000
                =============  =============  =============  =============

EBITDA:
 INCOME (LOSS)
  FROM
  OPERATIONS    $   1,326,000  $   3,024,000  $ (1,923,000)  $   2,308,000
 Add:
  Depreciation
  and
  amortization      1,669,000      1,002,000     4,526,000       2,924,000
                -------------  -------------  ------------   -------------
   EBITDA       $   2,995,000  $   4,026,000  $  2,603,000   $   5,232,000
                =============  =============  ============   =============

Contact Information: For Further Information: Big Dog Holdings, Inc. 121 Gray Avenue Santa Barbara, California 93101 www.bigdogs.com www.walkingco.com CONTACT: Laura Russell Investor Information (805) 963-8727, ext. 1360 Email Contact