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CD Warehouse Will Double DVD Floor Space

15 May, 2002 By: Holly J. Wagner

CD Warehouse stores will double floorspace devoted to DVD to continue narrowing its losses, the company reported today.

"We are in the process of completing a remerchandising program on our company stores, which will double our square footage offering for the sale of DVD,” said president and CEO Christopher Salyer. “With our ever-changing extensive product selection, low pricing strategy and superior customer service, our multimedia entertainment stores soon become a store of destination within the communities we serve. The key to our success is that our business model continually changes in both strategy and offerings to meet customer demand for entertainment and technology.”

CD Warehouse had in $6.3 million total revenues for the quarter ended March 31, compared to total revenues of $6.6 million for the first quarter of 2001, the company announced.

The company realized net income for the quarter of $25,000, compared to having sustained a net loss of $113,000 in the first quarter of 2001. Diluted earnings per share for the period were $0.01, versus ($0.03) for the same period in 2001. The company attributed a $138,000 increase in net income to decreases in general and administrative expenses of $169,000 and depreciation and amortization of $151,000, offset by a decrease in contribution from retail store operations of $176,000.

"As I stated last year in our fiscal 2001 earnings release, we believed our commitment to improving efficiencies, the store model, product margins, and enhancing customer satisfaction would return the company to profitability and increase shareholder value for years to come," Salyer said. "Our financial results released today are the fruits of those efforts and remain our focus for the remainder of the year."

The company plans to continue improving the operating results of company-operated stores through increased emphasis on DVDs, development of relationships to acquire product at lower cost and reduction of operating expenses.

CD Warehouse will also continue to focus its efforts on market expansion through increased franchised domestic and international store development rather than company-owned store development. The Company expects to open 15 to 20 new franchised stores during 2002.

The company's financials follow yesterday's announcements that David S. Boyd and Ken Sarachan joined its Board of Directors.

Boyd has been president and CEO of 23-coffeehouse Espresso Roma Corp. since its inception in 1980. He served as president of Asia Electronics Holding Company from September 1999 to September 2001 and is a graduate of UC Berkeley in Mechanical and Nuclear Engineering.

Ken Sarachan founded Berkeley-based Rasputin Music in the early 1970s owns and operates the Blondies Pizza chain and the Futura Clothing store.

"We are fortunate to have the global business perspective, broad financial expertise and board governance experience that both Mr. Boyd and Mr. Sarachan bring to our board of directors," Salyer said. “Their high energy and unrelenting integrity will provide a true contribution to our board."

Boyd and Sarachan assume the open board seats that were formerly held by Norman Proulx and K. Douglas Martin.

The chain also switched from Ernst & Young LLP as its independent accountants toSteakley Gilbert & Morgan, P.C. to audit consolidated financial statements, noting there were no o disagreements with Ernst & Young .

CD Warehouse, Inc. franchises and operates music stores in 35 states, the District of Columbia, England, Thailand, Guatemala, Canada and Venezuela under the names CD Warehouse, Disc Go Round, CD Exchange and Music Trader.

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