Nitches, Inc. Announces Third Quarter Fiscal 2008 Results

Reports Increased Sales, Reduced Losses, and a Paula Deen® Sublicense for Wal-Mart

SAN DIEGO, CA–(EMWNews – July 17, 2008) – Nitches, Inc. (NASDAQ: NICH) announced today

its results for the three and nine months ended May 31, 2008. Highlights

include:

--  An increase in net sales of $6.8 million, or 35.1%, for the three

    month comparative periods and $6.4 million, or 9.3%, for the nine month

    comparative periods.

    

--  Operating income of $321,000 for the recent 3 months versus a loss of

    $494,000 in the prior year period.

    

--  A reduced net loss of $.02 per share for the recent three months

    versus a net loss of $.08 per share for the prior year period.

    

--  Signing of a multi-year sublicense agreement for a line of Paula

    Deen® scented candles to be distributed primarily to Wal-Mart under the

    Company's license for the brand.

    

Operating Results

Nitches reported that consolidated net sales for the third quarter of

fiscal 2008 increased 35.1% to $26.3 million versus $19.5 million for the

third quarter of 2007. The sales increase was attributable primarily to

the inclusion of results from Backwoods®, a specialty retail chain

selling outdoor lifestyle products, which the Company acquired in February

2008. Incremental sales of home décor products, notably new Paula Deen®

branded dinnerware, as well as women’s sleepwear and men’s sportswear also

contributed to the increase. Consolidated net sales for the nine months

ended May 31, 2008 increased 9.3% to $75.6 million versus $69.2 million for

the nine months ended May 31, 2007.

The Company reported a consolidated net loss of $129,000 for the third

quarter of fiscal 2008 versus a net loss of $432,000 in the third quarter

last year. The third quarter loss per basic and diluted share was $.02

versus a loss of $.08 per basic and diluted share for the third quarter of

fiscal 2007. Consolidated net loss of $1.5 million for the nine months

ended May 31, 2008 compares with net income of $249,000 for the nine months

ended May 31, 2007. For the current year period, the loss was $.26 per

basic and diluted share versus earnings of $.05 per basic share and diluted

share for the first nine months of fiscal 2007.

Earnings continued to be negatively impacted during the current three and

nine month periods by lower realized gross margins due to pricing pressures

and higher sales allowances granted to significant customers amid a

weakening retail environment. Furthermore, noncash amortization and stock

compensation expenses, an increase in both cash and noncash interest

expenses related to the Company’s convertible debentures issued in June

2007, as well as increased borrowings under the Company’s factoring

agreement, all contributed to the net loss.

At May 31, 2008, the Company had unfilled customer orders of $31.1 million

compared to $45.2 million at the same time last year, with such orders

generally scheduled for delivery by November 2008 and November 2007,

respectively. The decrease in backlog is primarily due to reductions in

orders for the Company’s women’s sleepwear and men’s and women’s

sportswear, offset partially by an increase in orders for new Paula Deen®

dinnerware and related items sold under license. The reduction in orders

is attributable to the general slowdown in the U.S. economy, as well as the

decision by management to not accept sales where the risk of retailer

markdowns (deductions claimed by retailers against invoices due) is deemed

to be too high.

“We are pleased with our top line revenue growth of 35.1% for the quarter

and 9.3% for the year,” commented Steve Wyandt, Chairman and CEO of

Nitches. “We also continue to have success controlling the cash-based

expenses of our operations. However, the persistent poor gross margin

performance of our wholesale businesses reflects the pressures we are

facing from higher costs of supply with no commensurate increase in

wholesale prices, as well as our exposure to credit losses and markdown

claims from retailers.”

As for the reduction in wholesale order backlog, Mr. Wyandt remarked,

“Mergers, store closings and bankruptcies are reducing our wholesale

customer base. Additionally, the erosion of wholesale gross margins

warrants a more cautious approach to our traditional markets. As we shift

our revenue mix from lower margin private label products to higher margin

branded lines of business such as our Paula Deen® products and direct

ownership of Backwoods® specialty retail stores, we are being more

selective about who we sell to in our wholesale product lines.”

Paula Deen® License

Nitches also announced the signing of a multi-year sublicense agreement

with MVP Group International, Inc. to produce and distribute a line of

Paula Deen® candles primarily for sale to Wal-Mart. The candles will be

food-scented based on popular recipes of celebrity chef and Food Network

television personality Paula Deen. MVP has already received orders to ship

Paula Deen® branded candles to approximately 1,000 Wal-Mart stores for

the Fall 2008 season. MVP is a major candle supplier to U.S. discount

retailers, drug stores, and mass merchants. The sublicense was issued

under the Company’s broad license to produce, distribute and sublicense

Paula Deen® branded products.

About Nitches

Nitches, Inc. has been designing and marketing quality products for niche

markets since 1971. The Company’s owned and licensed apparel brands include

Adobe Rose®, Anne Lewin®, Claire Murray®, Crabtree & Evelyn®, Derek

Rose®, Dockers®, Eminence®, Gossard®, Nat Nast®, Princesse tam

tam®, Saguaro®, Shock Absorber®, The Skins Game®, So-Cal Speed

Shop®, Southwest Canyon®, and ZOIC®. The Company also distributes

home décor products under the Bill Blass® brand and tabletop items such

as dinnerware under the Paula Deen® brand. The Company’s products are

sold to better department stores, specialty boutiques, moderate department

stores, and national and regional discount department stores and chains.

The Company develops and manufactures private label products for many

leading retailers and multi-channel marketers. As of February 1, 2008, the

Company also operates eight Backwoods® outdoor lifestyle specialty retail

stores in Kansas, Oklahoma, Nebraska and Texas. Visit our web site at

www.nitches.com to learn more about our brands and our company.

Nitches is headquartered in San Diego, California with offices in New York

City, Los Angeles, Dallas, Austin and Hong Kong. The Company’s shares are

traded on the NASDAQ Capital Market under the symbol NICH.

Backlog amounts include both confirmed orders and unconfirmed orders that

the Company believes, based on industry practice and past experience, will

be confirmed. While cancellations, rejections and returns have generally

not been material in the past, there can be no assurance that such action

by customers will not reduce the amount of sales realized from the backlog

of orders at a given point in time. The amount of unfilled orders at any

given time is affected by a number of factors, including the timing of the

receipt and processing of customer orders and the scheduling of the

manufacture and shipping of the product, which may be dependent on customer

requirements.

Except for historical information contained herein, the statements in this

release are forward-looking and made pursuant to the safe harbor provisions

of the Private Securities Litigation Reform Act of 1995. Forward-looking

statements involve known and unknown risks and uncertainties that may cause

the Company’s actual results in future periods to differ materially from

forecasted results. Those risks include, among other things, a softening

of retailer or consumer acceptance of the Company’s products, pricing

pressures and other competitive factors, or the unanticipated loss of a

major customer. The Company’s results may also differ materially from

period to period due to the seasonal nature of the Company’s product lines.

These and other risks are more fully described in the Company’s filings

with the Securities and Exchange Commission.

                        Three Months Ended          Nine Months Ended

                    --------------------------  --------------------------

                       May 31,       May 31,       May 31,       May 31,

                        2008          2007          2008          2007

                    ------------  ------------  ------------  -------------



Net sales           $ 26,316,000  $ 19,475,000  $ 75,572,000  $  69,170,000

Operating income

 (loss)             $    321,000  $   (494,000) $   (216,000) $   1,189,000

Net income (loss)   $   (129,000) $   (432,000) $ (1,529,000) $     249,000



Basic earnings

 (loss) per share   $      (0.02) $      (0.08) $      (0.26) $        0.05

Diluted earnings

 (loss) per share   $      (0.02) $      (0.08) $      (0.26) $        0.05



Weighted average

 number of common

 shares:

Basic                  6,019,644     5,421,259     5,818,622      5,193,555

Diluted                6,019,644     5,421,259     5,818,622      5,297,123