Global Sports' Revenues Doubled In Q3, On Track For Q4 Profit

Global Sports' third-quarter net revenue was $18.1 million, which represented a 100% increase compared to net revenue of $9.0 million for the third quarter of fiscal 2000. Comparable-store sales increased by approximately 57% from the third quarter of fiscal 2000 to the third quarter of fiscal 2001. Comparable-stores sales are calculated based on Web sites that Global Sports has developed and operated for the entire periods for which the comparisons are made. The pro forma loss from continuing operations was $5.3 million for the third quarter of fiscal 2001, which represents a 46% improvement compared to a pro forma loss from continuing operations of $9.7 million for the third quarter of fiscal 2000. Pro forma loss from continuing operations per share was $0.15 for the third quarter of fiscal 2001 compared with a pro forma loss from continuing operations per share of $0.45 for the third quarter of fiscal 2000. Pro forma loss from continuing operations and pro forma loss from continuing operations per share exclude all non-cash charges, including stock-based compensation and depreciation and amortization expenses. The company reported cash, cash equivalents, and short-term investments of $93.1 million and shareholders' equity of $142.5 million at the end of the third quarter of fiscal 2001.

Gross profit was $6.2 million and gross margin was 34.1% for the third quarter of fiscal 2001 compared to gross profit of $2.7 million and gross margin of 30.3% for the third quarter of fiscal 2000. Operating expenses excluding non-cash charges were $12.0 million for the third quarter of fiscal 2001 compared to $12.8 million for the third quarter of fiscal 2000, a decrease of approximately 6% on a two-fold increase in sales. Operating expenses excluding non-cash charges for the third quarter of fiscal 2001 primarily consisted of sales and marketing expenses of $7.4 million, product development expenses of $2.3 million, and general and administrative expenses of $2.4 million. This compares to sales and marketing expenses of $8.6 million, product development expenses of $1.9 million, and general and administrative expenses of $2.2 million for the third quarter of fiscal 2000. Sales and marketing expenses primarily include general distribution facility expenses, payroll and related expenses for personnel engaged in merchandising, buying, marketing, client services, fulfillment and customer service, credit card fees, partner revenue share, as well as advertising and media spending. Non-cash charges for the third quarter of fiscal 2001 totaled $9.4 million compared to $2.6 million for the third quarter of fiscal 2000. These expenses included primarily stock-based compensation and depreciation and amortization expenses.

The following forward-looking statements reflect Global Sports' expectations as of October 24, 2001. Given the potential changes in general economic conditions and consumer spending, the emerging nature of e-commerce, and various other risk factors discussed below, actual results may differ materially. The company intends to continue its practice of not updating forward-looking statements until its next quarterly results announcement.

Full Year 2001 Expectations:
-- Net revenue is expected to exceed $100.0 million.
-- Gross margin is expected to be between 33.0% and 33.5%.
-- Cash operating expenses are expected to be between $51.0 and $52.0 million.
-- Net interest and other income is expected to be approximately $2.8 million.
-- Pro forma loss from continuing operations is expected to be less than $15.0 million.
-- Pro forma loss from continuing operations per share is expected to be $0.47 or less.
-- Cash, cash equivalents, and short-term investments are expected to exceed $100.0 million at December 29, 2001.

Fourth Quarter 2001 Expectations:
-- Net revenue is expected to exceed $50.0 million.
-- Gross margin is expected to be between 34.0% and 35.0%.
-- Cash operating expenses are expected to be between $15.5 million and $16.0 million.
-- Net interest and other income is expected to be between $400,000 and $500,000.
-- Pro forma profit from continuing operations is expected to exceed $2.0 million.
-- Pro forma profit from continuing operations per share is expected to be between $0.04 and $0.05.

Michael Rubin, Chairman and CEO of Global Sports, commented on the company's third quarter results, saying, "Global Sports demonstrated continued operating momentum in the third quarter of 2001. Once again, we doubled our top-line results driven by significant partner expansion and strong same-store sales growth, while we reduced our cash operating expenses in absolute dollars on a year-over-year basis. We also achieved meaningful gross margin expansion in the period and finished the quarter with a very strong financial position that included more than $93 million in cash, cash equivalents and short-term investments."

"The third quarter of 2001," he continued, "was also a notable period from a strategic perspective for Global Sports, highlighted by our expansion beyond the sporting goods category which I anticipate will provide our company with a substantially larger long-term growth opportunity. As part of this initiative we announced our first non-sporting goods deals, which included being selected to manage certain aspects of Kmart Corp.'s overall e-commerce business and entering into a definitive agreement to acquire Ashford.com, which we expect will serve as a foundation for extending our outsourcing solution to the jewelry and luxury goods categories. The combination of a strong operating momentum, an excellent financial position and an outstanding growth platform leads us to be confident about our prospects for the fourth quarter of 2001 and beyond."