Movie Star, Inc., Reports

Fiscal 2005 Fourth-Quarter And Full-Year Financial Results

New York, New York (August 25, 2005)—Movie Star, Inc. (AMEX: MSI), today announced financial results for the three months and full year ended June 30, 2005. Net sales for the fiscal 2005 fourth quarter decreased 23.5% to $8,054,000 compared with $10,524,000 for the same period last year and net sales for the full year increased 9.0% to $58,533,000 from last year’s $53,691,000.

For the 2005 fourth quarter, the Company recorded a net loss of $2,056,000, or $0.13 per share, compared with a net loss of $506,000, or $0.03 per share in the same period last year. The quarterly gross margin decreased to 23.5% from 25.8% in the 2004 comparable period. The lower gross margin resulted primarily from the sales contribution of the Sidney Bernstein & Son division, whose lingerie line sells at a lower gross margin than Movie Star’s core line. Selling, general and administrative (“SG&A”) expenses in the fiscal 2005 fourth quarter increased to $5,147,000 from last year’s $3,557,000. Included in the SG&A expenses for fiscal 2005 were the additional expenses for the Sidney Bernstein & Son division, as well as charges approximating $745,000 for the closing of our Petersburg, Pennsylvania distribution center, the termination of our prior chairman’s services in connection with our consulting agreement with him and costs associated with personnel changes.

For fiscal 2005, the Company recorded a net loss of $3,122,000, or $0.20 per share, compared with net income of $128,000, or $0.01 per diluted share, reported last year. For fiscal 2005, the gross margin decreased to 24.3% from last year’s 30.0%. The decline in gross margin was due to the addition of Sidney Bernstein & Son and a shipment of a $7,800,000 low margin order that occurred primarily in the second quarter. SG&A expenses increased to $19,024,000 from last year’s $15,824,000. Included in the SG&A expenses for fiscal 2005 were the additional expenses for the Sidney Bernstein & Son division, the $745,000 described above and in fiscal 2004 there was a special charge of $1,084,000.

Mel Knigin, Movie Star’s President and Chief Executive Officer, stated: “While fiscal 2005 was both a disappointing and challenging year, we dealt with several difficult operating and business issues and are entering fiscal 2006 with a positive attitude. Recently, we made personnel changes, including reductions in staff, which were necessary to improve our business, closed our Petersburg, Pennsylvania distribution center and terminated a consulting agreement with our prior chairman.

Looking forward, fiscal 2006 is off to an encouraging start. While we expect revenues, for the first half, to be less than last year, due to higher gross margin orders and our efforts to reduce expenses, we expect to make a profit in the first half of fiscal 2006.”

MOVIE STAR, INC. produces and sells ladies apparel, including sleepwear, robes, leisurewear, and daywear. Current collections include the Cinema Etoile premium line of intimate apparel and the Movie Star line of apparel sold as private label programs.

Certain of the matters set forth in this press release are forward-looking and involve a number of risks and uncertainties. Among the factors that could cause actual results to differ materially are the following: business conditions and growth in the industry; general economic conditions; addition or loss of significant customers; the loss of key personnel; product development; competition; risks of doing business abroad; foreign government regulations; fluctuations in foreign rates; rising costs for raw materials and the unavailability of sources of supply; the timing of orders booked; and the risk factors listed from time to time in the Company’s SEC reports.

CONTACT: INVESTOR RELATIONS:

Movie Star, Inc. -or- SM Berger & Company, Inc.

Thomas Rende, CFO Stanley Berger

(212) 798-4700 (216) 464-6400

[Tables follow]

MOVIE STAR, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(In Thousands, Except Per Share Amounts)

	Three Months Ended		Fiscal Year Ended
	June 30,		June 30,
	2005	2004	2005	2004
	(Unaudited)

Net sales	$ 8,054	$10,524	$58,533	$53,691
Cost of sales	6,158	7,804	44,304	37,581
Gross profit	1,896	2,720	14,229	16,110
Selling, general and administrative expenses	5,147	3,557	19,024	15,824

(Loss) income from operations	(3,251)	(837)	(4,795)	286

Interest expense, net	48	(3)	281	64
(Loss) income before income tax (benefit) provision	(3,299)	(834)	(5,076)	222
Income tax (benefit) provision	(1,243)	(328)	(1,954)	94

Net (loss) income	$(2,056)	$ (506)	$(3,122)	$ 128

BASIC NET (LOSS) INCOME PER SHARE	$(.13)	$(.03)	$(.20)	$.01

DILUTED NET (LOSS) INCOME PER SHARE	$(.13)	$(.03)	$(.20)	$.01

Basic weighted average number of shares outstanding	15,640	15,600	15,625	15,574
Diluted weighted average number of shares outstanding	15,640	15,600	15,625	16,199

MOVIE STAR, INC.

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Number of Shares)

June 30,		June 30,
2005		2004

ASSETS

Current Assets
Cash	$ 178	$ 2,527
Receivables, net	5,973	7,577
Inventory	11,730	5,938
Deferred income taxes	2,260	2,571
Prepaid expenses and other current assets	372	588
Total current assets	20,513	19,201

Property, plant and equipment, net	755	1,021
Deferred income taxes	2,473	148
Goodwill	537	-
Assets held for sale	174	-
Other assets	455	409
Total assets	$24,907	$20,779

LIABILITIES AND SHAREHOLDERS’ EQUITY


Current Liabilities
Notes payable	$ 4,794	$ -
Accounts payable	3,579	1,937
Accrued expenses and other current liabilities	1,467	721
Total current liabilities	9,840	2,658

Deferred lease liability	315	283

Other long-term liability	75	91

Shareholders’ equity
Common stock, $.01 par value – authorized 30,000,000 shares; issued 17,657,000 shares in 2005 and 17,617,000 shares in 2004	177	176
Additional paid-in capital	4,747	4,706
Retained earnings	13,361	16,483
Accumulated other comprehensive income	10	-
Treasury stock, at cost – 2,017,000 shares	(3,618)	(3,618)
Total shareholders’ equity	14,677	17,747

Total liabilities and shareholders’ equity	$24,907	$20,779