Movie Star, Inc., Reports

Fiscal 2004 Fourth-Quarter and Full-Year Financial Results

New York, New York (August 24, 2004)—Movie Star, Inc. (AMEX: MSI), today announced financial results for the three months and full year ended June 30, 2004. As expected, the Company experienced significantly lower net sales and profitability in the fiscal 2004 fourth quarter, compared with the same period last year. Despite this decline, the balance sheet improved at June 30, 2004 compared with the prior year’s statement and the Company made considerable progress towards expanding future business.

Net sales for the fiscal 2004 fourth quarter decreased 32.2 percent to $10,524,000 from $15,513,000 for the 2003 final quarter. For the full year, net sales declined to $53,691,000 from $64,916,000 in the prior year.

For the 2004 fourth quarter, a net loss of $506,000, or $0.03 per share, was recorded compared with last year’s net income of $1,049,000, or $0.07 per diluted share. The quarterly gross margin decreased 6.5 percent to 25.8 percent from 32.3 percent in the 2003 comparable period while selling, general and administrative expenses in the fiscal 2004 fourth quarter increased to $3,557,000 from last year’s $3,311,000.

Mel Knigin, President and Chief Executive Officer, stated: “We view the bottom line results as a temporary setback that the Company’s financial strength easily withstood. We were pleased to continue to generate positive cash flow in fiscal 2004. At June 30, 2004, Movie Star had no debt and $2,527,000 in cash. Shareholders’ equity increased slightly in 2004 to $17,747,000 from $17,264,000 at June 30, 2003. Furthermore, the manner in which we have continued to closely manage our balance sheet enabled us to acquire the inventory and other assets of Sidney Bernstein & Son Lingerie, Inc. and enter into a new credit facility with HSBC Bank USA.”

For fiscal 2004, net income decreased to $128,000, or $0.01 per diluted share, from $3,431,000, or $0.22 per diluted share, reported last year. For fiscal 2004, the gross margin decreased a modest 1.7 percent to 30.0 percent from last year’s 31.7 percent. Selling, general and administrative expenses increased to $15,824,000 from last year’s $14,623,000. The current year included a special charge of $1,084,000 taken in the third quarter. Had it not been for this charge, selling, general and administrative expenses would have almost equaled the prior year’s figure.

Mr. Knigin further said, “Management has worked hard in following strategies that will expand the Company’s top line growth beginning this fiscal year even though we are experiencing certain gross margin pressures. Despite this lower gross margin, there is a special sense of optimism throughout Movie Star looking at our next six-month selling cycle based on the additional open orders of the Sidney Bernstein and Son division. We believe that our top line will begin to grow starting in the second quarter of this fiscal year. The Sidney Bernstein and Son division is off to an excellent start. Additionally, the initial response to our new Maidenform line that is scheduled for delivery in the beginning of calendar 2005 has been strong.”

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 INCOME

(In Thousands, Except Per Share Amounts)

	Three Months Ended		Fiscal Year Ended
	June 30,		June 30,
	2004	2003	2004	2003
	(Unaudited)

Net sales	$10,524	$15,513	$53,691	$64,916
Cost of sales	7,804	10,508	37,581	44,345
Gross profit	2,720	5,005	16,110	20,571
Selling, general and administrative expenses	3,557	3,311	15,824	14,623

Income (loss) from operations	(837)	1,694	286	5,948

Interest expense, net	(3)	63	64	347
Income (loss) from operations before income taxes	(834)	1,631	222	5,601
Income taxes (benefit)	(328)	582	94	2,170

Net income (loss)	$ (506)	$ 1,049	$ 128	$ 3,431

BASIC NET INCOME (LOSS) PER SHARE	$(.03)	$.07	$.01	$.23

DILUTED NET INCOME (LOSS) PER SHARE	$(.03)	$.07	$.01	$.22

Basic weighted average number of shares outstanding	15,600	15,275	15,574	15,133
Diluted weighted average number of shares outstanding	15,600	15,977	16,199	15,407

MOVIE STAR, INC.

CONSOLIDATED BALANCE SHEETS

(In Thousands, Except Number of Shares)

June 30,		June 30,
2004		2003

ASSETS

Current Assets
Cash	$ 2,527	$ 219
Receivables, net	7,577	8,992
Inventory	5,938	10,392
Deferred income taxes	2,571	2,511
Prepaid expenses and other current assets	588	365
Total current assets	19,201	22,479

Property, plant and equipment, net	1,021	1,153
Deferred income taxes	148	50
Other assets	409	407

Total assets	$20,779	$24,089

LIABILITIES AND SHAREHOLDERS’ EQUITY


Current Liabilities
Notes payable	$ -	$ 2,277
Current maturities of capital lease obligations	-	27
Accounts payable	1,937	2,888
Accrued expenses and other current liabilities	721	1,308
Total current liabilities	2,658	6,500

Deferred lease liability	283	224

Other long-term liability	91	101

Shareholders’ equity
Common stock, $.01 par value – authorized 30,000,000 shares; issued 17,617,000 shares in 2004 and 17,412,000 shares in 2003	176	174
Additional paid-in capital	4,706	4,353
Retained earnings	16,483	16,355
	21,365	20,882

Less: Treasury stock, at cost – 2,017,000 shares	3,618	3,618
Total shareholders’ equity	17,747	17,264

Total liabilities and shareholders’ equity	$20,779	$24,089