CORRECTION: First Quarter 2011 Results

Phoenix Footwear

Reports FIRST Quarter 2011 Results

CARLSBAD, Calif., May 18, 2011 -- Phoenix Footwear Group, Inc. (OTC Link: PXFG.PK) today reported results for the first quarter ended April 2, 2011.

First Quarter 2011

Ø  Net loss of $339,000, or $0.04 per share for the quarter.

Ø  Net Sales from continuing operations decreased to $4.8 million or 8.5%, while gross margins improved 190 basis points to 35.5%

Ø  SG&A expense decreased $454,000 or 18.4% compared to the first quarter of 2010.

Ø  SG&A included $236,100 non-recurring expense related to the deregistration of the Company’s shares and relocation of its Corporate Offices.

For the quarter ended April 2, 2011, net sales totaled $4.8 million compared to $5.3 million in the prior year comparative period. This decrease is primarily attributable to significant production delays the Company experienced from one of its primary vendors and to a lesser degree, poor sell through of the Company’s HealthGlide product also contributed to lower sales as the market for “toning” and similar footwear became highly promotional during the quarter.

Gross profit was $1.7 million for the quarter, decreased $60,000 compared to the prior year’s comparable quarter, while gross margin improved 190 basis points to 35.5%, compared to 33.6% in the first quarter of 2010.

Selling, general and administrative expenses, or SG&A, totaled $2.0 million, a decrease of 18.4% compared to $2.5 million in the first quarter of 2010. SG&A as a percentage of net sales was 42% for the first quarter of 2011 compared to 47% in the prior year comparative period. SG&A for the period include $164,000 in expense related to its migration from the NYSE Amex to the OTC Markets in addition to $72,100 in expense related to the downsizing of its headquarters as the last phase of the Company’s downsizing efforts. Also included in SG&A is $53,000 of depreciation expense.

Interest expense for the quarter totaled $179,000 compared to $61,000 for the first quarter of 2010.

In the first quarter, our net loss totaled $339,000. Operating loss from continuing operations for the quarter totaled $436,000 or $0.05 a share compared to an operating loss of $760,000 or $0.09 a share in the prior year comparative period. 

Other Events

During the first quarter of this year, the Company entered into discussions for the sale of its H.S. Trask brand reflecting the Company’s focus on growing the Trotters and SoftWalk brands. As a result, operating results for H.S. Trask have been reclassified to discontinued operations beginning in fiscal 2011 and for all periods presented.

 On May 13, 2011, the Company entered into an Asset Purchase Agreement with Genesco, Inc. whereby the Company agreed to sale the intellectual property and related assets of the H.S. Trask brand. As part of the Agreement, Genesco has provided the Company with a 90 day royalty free license to sell all remaining H.S. Trask inventory in its possession. As of the closing, the Company had approximately $150,000 of H.S. Trask inventory on hand.

The Company also announced today, the addition of Stephanie Pianka to its Board of Directors.  With this addition the Board is expanded to four directors including Messrs. Steven Deperrior, Frederick Port and James Riedman.  Ms. Pianka is presently a principal with MPT Advisors and has held a number of financial executive positions, including 15 years within the General Electric organization.

About Phoenix Footwear Group, Inc.

Phoenix Footwear Group, Inc., headquartered in Carlsbad, California, specializes in quality comfort women’s and men’s footwear with a design focus on fitting features. Phoenix Footwear designs, develops, markets and sells footwear in a wide range of sizes and widths under the brands Trotters®, SoftWalk®, and H.S. Trask®. These brands are primarily sold through department stores, leading specialty and independent retail stores, mail order catalogues and internet retailers and are carried by approximately 700 customers in over 950 retail locations throughout the U.S. Phoenix Footwear has been engaged in the manufacture or importation and sale of quality footwear since 1882.

Forward-Looking Statements

This press release contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. These forward-looking statements include, but are not limited to, statements regarding Phoenix Footwear’s ability to repay its bank debt in a timely manner, future growth and performance of its individual brands, expected financial performance and condition for fiscal 2011 and/or statements preceded by, followed by or that include the words “believes,” “could,” “expects,” “anticipates,” “estimates,” “intends,” “plans,” “projects,” “seeks,” “exploring,” or similar expressions. Although Phoenix Footwear believes that the assumptions underlying the forward-looking statements contained herein are reasonable, any of the assumptions could be inaccurate, and therefore, there can be no assurance that the forward-looking statements included in this press release will prove to be accurate. In light of the significant uncertainties inherent in the forward-looking statements included herein, the inclusion of such information should not be regarded as a representation by Phoenix Footwear or any other person that the objectives and plans of Phoenix Footwear will be achieved. All forward-looking statements included in this press release speak only as of the date of this press release and are based on Phoenix Footwear's current expectations and projections about future events, based on information available at the time of the release, and Phoenix Footwear expressly disclaims any obligation to release publicly any update or revision to any forward-looking statement contained herein if there are changes in Phoenix Footwear’s expectations or if any events, conditions or circumstances on which any such forward-looking statement is based.

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