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Innovo Group Reports Record Third Fiscal Quarter

From: ASAP

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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, today announced that, in its 2002 third fiscal quarter, net sales of more than $10.1 million were 287% higher than in the comparable period last year, exceeding sales for all of fiscal 2001. Moreover, nine-month sales for fiscal 2002 climbed 251%, to $20.2 million, more than doubling results for the prior fiscal year.

Net sales for the quarter ended August 31, 2002, were $10,148,000, compared with $2,625,000 in the second quarter ended September 1, 2001. Gross profit of $3,357,000 in the quarter was more than triple the $951,000 realized in the same quarter last year. Net income on a fully diluted basis was $820,000, or $.05 per share, compared with a loss of $16,000, or $.00 per share, in the prior year quarter. Weighted average shares outstanding on a fully diluted basis were 15,630,000 in the current quarter, compared with 14,283,000 in the year earlier period.

Net sales for the nine months ended August 31, 2002, were $20,219,000, compared with $5,747,000 in the nine months ended September 1, 2001. Gross profit of $6,615,000 for the first nine months was more than triple the $2,196,000 realized in the comparable year earlier period. Net income on a fully diluted basis for the nine months ended August 31, 2002 amounted to $531,000, or $.03 per share, compared with a loss of $75,000, or $.01 per share, in the same period last year.

Commenting on the results, Jay Furrow, CEO of Innovo Group, said: "These results underscore the strong improvements that have been continuing throughout the first three quarters of this year in all three of our three main operating subsidiaries - Innovo, Inc. (Innovo), Joe's Jeans (Joe's) and Innovo Azteca Apparel, Inc. (IAA).

"Innovo's increase," Furrow said, "is a direct result of this unit's ability to continue to expand its customer base for its branded product lines, a continued increase in demand for its craft products, and its ongoing success with growing its private label business. This resulted in Innovo achieving a 136% increase in revenues for the quarter compared to the same period last year."

Demand for Joe's products, the CEO noted, "continued to be exceptionally strong during the period, with growing demand in the international market generating an increase of 552% compared with the prior quarter of fiscal 2001for this subsidiary."

"In the case of IAA, which was created in the third quarter of 2001 to market general apparel products, we continued to see its business expand through growth from both existing and new customers," Furrow continued.

The Innovo Group CEO noted that in the third fiscal quarter of fiscal 2002, the company's gross margin decreased 3.2 percentage points, to 33.1%. This was attributable, he explained, to an increase in incoming freight expense as more of the company's products are purchased from overseas suppliers coupled to the fact that the company's revenues for the fiscal 2002 period include those of IAA. As a result of the products distributed by IAA, this operating unit traditionally has a lower gross margin than the other divisions.

Furrow also said that selling, general and administrative costs increased $1,352,000, or 143%, for the same period, directly attributable to the company's continued growth and development. The increase in SG&A expense also reflects costs associated with the operations of the company's parent publicly traded company, Innovo Group Inc.

"Our very measurable quarter by quarter improvements, the attaining of a level of sales in one quarter better than all of last year, and the more than doubling of sales in the first nine months of this fiscal year compared with last year's results have been extremely gratifying," the CEO said. "They are a tribute to the Innovo Group team who continue to improve on already outstanding performance day by day, and on a global basis. We are optimistic that the year ahead will continue to provide strong growth opportunities, and we look forward to the challenge of continuing to meet the high expectations we have set for the Company.

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