Innovo Group, Inc. Reports Profitable Second Quarter

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Innovo Group, Inc. Reports Profitable Second Quarter

Knoxville, TN, July 25, 2001 ­ Innovo Group Inc. (NASDAQ: INNO), a sales and marketing organization designing and selling craft, accessory and apparel products to the retail, specialty and premium markets, reported results today for the three months and six months ending June 2, 2001.

For the second quarter of 2001, the Company¹s income from operations increased to $84,000 compared to a loss from operations of $656,000 for the corresponding period of the prior year. For the period, net income increased to $41,000 versus a net operating loss of $740,000 for the same period in 2000. The Company¹s move to profitability is attributable to increased revenues, a reduction in expenses pursuant to the Company¹s recent operational restructuring and benefits associated with the Company¹ s improved working capital position.

Net Sales for the period increased to $1,968,000 compared to $1,101,000 in the second quarter of 2000, representing a 79% increase. The growth is a result of increased demand for the Company¹s promotional coolers, sales generated by the Company¹s newly formed apparel division which features the Joe¹s Jeans brand of women¹s denim jeans and knit shirts, and other basic apparel products.

Jay Furrow, President of Innovo Group Inc., stated that ³the results for the quarter further validates the strength of the Company¹s new operational structure and demonstrates the potential of the Company¹s new business model. As we continue to aggressively manage expenses, open new markets and expand our existing markets, we are focused on further increasing the bottom line and shareholder value. While obtaining profitability was a goal of the Company, we see it as just a stepping stone to the next level of the Company¹s development and growth.²

For the second quarter of fiscal 2001, the Company¹s gross margin percentage increased 10.5 percentage points from 27.4% in 2000 to 37.9% in 2001. The increase is a result of the Company¹s ability to obtain better pricing on imported products from the Orient and Mexico and as a result of the higher margins associated with the products sold under the Company¹s Joe¹s Jeans division. The Joe¹s Jeans division experienced a 63% gross margin for the period.

Selling, General and Administrative costs decreased $241,000 or 27% for the same period as a result of the Company¹s operational restructuring during the end of fiscal 2000. The Company¹s operational restructuring included the closure of its domestic production and distribution facilities, a reduction of employees and a decrease in the Company¹s fixed and variable expenses.

Six Months Results

For the six months ending June 2, 2001, the Company¹s income from operations increased to $28,000 from a loss from operations of $1,364,000 for the comparative period in 2000. Net loss for the first six months of 2001 was $62,000 versus a loss of $1,565,000 for the same period in 2000.

Net Sales for the six months ended June 2, 2001 increased to $3,122,000 from $1,913,000 in the comparative period of 2000, representing an increase of 63%. This increase is a result of increase demand for the Company¹s craft and accessory products and revenues generated pursuant to the Company¹s entry into the apparel market.

About Innovo Group Inc.

Innovo Group Inc. through its subsidiaries Innovo Inc. and Joe¹s Jeans, is a sales and marketing organization designing and selling craft, accessory and apparel products to the retail and premium markets. The Company¹s craft products include canvas and denim totebags and aprons. The Company¹s accessory product line is comprised of such products as licensed and non-licensed backpacks, totebags, waist packs and handbags. The Company¹s apparel products consist of women¹s high-end denim jeans and knit shirts featuring the Joe¹s brand. For more information, visit the company web site at

Statements in this news release which are not purely historical facts are forward-looking statements, including statements containing the words believe", "estimate", "project", "expect" or similar expressions. These statements are made pursuant to the safe harbor provisions of Section 21E of the Securities Exchange Act of 1934, as amended. All forward-looking statements are based upon information available to Innovo Group Inc. on the date of this release. Any forward-looking statement inherently involves risks and uncertainties that could cause actual results to differ materially from the forward-looking statements. Factors that would cause or contribute to such differences include, but are not limited to, continued acceptance of the Company's products in the marketplace, successful implementation of its strategic plan, the extension or refinancing of its existing bank facility and the restrictions any such extension or refinancing could place on the Company, the ability to obtain new financing from other financing sources, the ability to generate positive cash flow from operations and asset sales, competitive factors, dependence upon third-party vendors, and other risks detailed in the Company's periodic report filings with the Securities and Exchange Commission. By making these forward-looking statements, the Company undertakes no obligation to update these statements for revisions or changes after the date of this release. Readers are cautioned not to place undue reliance on forward-looking statements.

For further information, please contact:

Donna Drewrey
Innovo Group Inc.