Mr. Jeffrey Wortsman reports

DANIER LEATHER REPORTS FISCAL 2014 THIRD QUARTER RESULTS AND UPDATE ON ITS STRATEGIC PLAN

Danier Leather Inc. has released its interim consolidated financial results for the 13-week and 39-week periods ended March 29, 2014. The company also provided an update on the implementation of its previously disclosed strategic plan.

                             FINANCIAL HIGHLIGHTS 
      (In thousands, except EPS, square footage and number of stores)
                         
                                    13 weeks ended            39 weeks ended 
                             March 29,    March 30,    March 29,    March 30,
                                 2014         2013         2014         2013

Sales                      $   31,011   $   37,400   $  117,221   $  126,626
EBITDA                     $   (4,541)        (224)       1,740        8,489
Net earnings (loss)            (4,286)        (883)        (983)       4,063
EPS -- basic               $    (1.12)  $    (0.23)  $    (0.26)  $     0.95
EPS -- diluted             $    (1.12)  $    (0.23)  $    (0.26)  $     0.91
Number of stores                   89           89           89           89
Retail square footage         281,024      287,567      281,024      287,567

Fiscal 2014 third quarter and nine months results

Sales during the third quarter of fiscal 2014 decreased by 17 per cent, or $6.4-million, to $31.0-million compared with $37.4-million during the third quarter last year.

Over the same period, comparable store sales decreased by 19 per cent. With a longer-than-usual winter and extreme cold weather (among the coldest winters in history in some parts of Canada), customers were looking for extreme cold weather insulated jackets beyond what Danier had to offer. The weather, along with increased promotional pricing, and insufficient quantities of parkas and cold-weather-related jackets, resulted in significantly lower outerwear sales. Next winter season, Danier plans to adjust its product assortment to ensure a better selection of cold weather outerwear to improve its competitiveness in the outerwear category.

At the same time, Danier's higher-margin accessories business continued to grow with sales of handbags increasing more than 30 per cent compared with the corresponding period last year. The continued growth in accessories is largely a reflection of the significant changes and investments made during the second quarter of last year beginning to take full effect.

Year-to-date sales decreased by 7 per cent, or $9.4-million, to $117.2-million, while comparable store sales decreased by 9 per cent compared with the corresponding period last year.

During the third quarter of fiscal 2014, the company launched the Danier e-commerce click-to-buy store for orders within Canada. At present, sales from the e-commerce business did not have a meaningful impact on revenue as it launched midway through the quarter and is still in its early days. However, preliminary indications and feedback received to date are positive, and Danier believes that its transactional website will now allow it to reach a broader range of customers across Canada, including younger customers who are more accustomed to on-line shopping.

Gross profit as a percentage of revenue during the third quarter decreased by 340 basis points to 43.9 per cent compared with 47.3 per cent during the third quarter last year. Gross profit margin during the first nine months of fiscal 2014 decreased by 170 basis points to 49.8 per cent compared with 51.5 per cent during the first nine months of last year. The decrease in gross margin was mainly due to higher markdowns and increased promotional activity in order to reduce inventory levels. Gross profit margin was also affected by the weakened Canadian dollar relative to the U.S. dollar, as Danier purchases a significant amount of its inventory from foreign vendors with payment terms in U.S. dollars.

Selling, general and administrative expenses (SG&A) during the third quarter of fiscal 2014 increased by about $600,000 to $19.4-million, compared with $18.8-million during the third quarter last year. Year-to-date SG&A increased by approximately $200,000 to $59.8-million compared with $59.6-million during the first nine months of last year. The increase in SG&A is mainly due to severance provisions in connection with senior management changes discussed below, impairment loss on property and equipment, increased store rent and occupancy charges, and higher administrative salaries associated with Danier's continuing investments to support the growth of the higher-margin accessories business, and further enhancements to merchandise planning and sourcing capabilities, as Danier continues to implement its strategic plan.

Net loss during the third quarter of fiscal 2014 was $4.3-million ($1.12 loss per diluted share) compared with $900,000 (23-cent loss per diluted share) during the third quarter last year. For the year-to-date period, net loss was $1.0-million (26-cent loss per diluted share) compared with net earnings of $4.1-million (91 cents per diluted share) during the first nine months of last year.

Danier continues to maintain a strong balance sheet with cash of $15.1-million, working capital of $35.8-million, no long-term debt and a book value of $14.33 per outstanding share.

Strategic plan update -- senior leadership team enhancements

"We are disappointed with the company's unsatisfactory financial results this past quarter. We are continuing to make a number of changes which we believe will produce meaningful improvements," said Jeffrey Wortsman, president and chief executive officer. "We are continuing to implement our strategic plan and are working tirelessly to ensure that we meet our financial and operational goals."

A critical aspect of the successful implementation of the company's strategic plan is to attract highly motivated, positive and independent-minded people who bring fresh ideas and expertise to Danier, and participate at all levels. To that end, over the past year, Danier has made changes to its senior leadership team, adding a number of key executives that it believes will be invaluable in driving the execution of the company's strategic plan. The enhanced senior leadership team includes the following:

Elizabeth Margles, vice-president, marketing, and chief marketing officer

Ms. Margles joined Danier in February, 2014, and is responsible for leading the development and execution of the overall brand and marketing strategies for the retail store business and the recently launched Danier e-commerce business. Ms. Margles brings 17 years of retail and fashion brand experience with a proven record for launching and positioning national and international brands, having created and implemented successful strategies for luxury brands, including Porter Airlines, Joe Fresh and Holt Renfrew. She has also advised U.S. retailers such as J. Crew and Nordstrom on market entry into Canada.

Rodney McBrien, vice-president, information technology, and chief information officer

Mr. McBrien joined Danier in January, 2014, and is responsible for setting the direction and managing capital investments for all information technology systems in support of all Danier stores across the country, the Danier website (including e-commerce), distribution centres, corporate head office and departments, and international sourcing offices. Mr. McBrien brings 20 years of consulting and direct leadership experience in all aspects of IT. He joins Danier from IBM Global Services, where he led large-scale system implementation for companies in the retail industry.

Brian Burgess, executive vice-president, merchandising, sourcing and planning

Mr. Burgess joined Danier in October, 2013, and is responsible for merchandising strategies, product and assortment for all categories, including apparel and accessories, and supplier relationships. Mr. Burgess brings to Danier 17 years of experience in the retail sector, and apparel and accessories categories, proven business leadership, and a record for achieving results. Mr. Burgess developed and led successful strategies for brands and retailers including Hudson's Bay Company, Joe Fresh and TJX Canada.

Michael Watson, executive vice-president, retail operations

Mr. Watson joined Danier in January, 2013, and his responsibilities include overseeing Danier's human resources, store operations, and logistics and distribution. With more than 20 years experience in the retail industry, Mr. Burgess is recognized for his ability to motivate and build strong customer-focused cultures, as well as for his operational and business acumen. He has led growth in store operations both in Canada and the United States for brands and retailers such as Hudson's Bay Company, Northern Reflections, the Limited, and Bath and Body Works.

Bryan Tatoff, executive vice-president, chief financial officer and secretary

Mr. Tatoff has been with Danier for 17 years in roles of increasing responsibility. Mr. Tatoff will continue in his current role with responsibility for financial strategy and the implementation of financial plans aligned with Danier's operational and growth strategies. He also maintains responsibility for financial reporting.

As previously disclosed, Danier has been working on implementing its stated business strategy, which includes several key elements. Among other things, Danier is continuing to focus on the growth of the accessories line of business, the introduction of on-line sales, as well as improved marketing, merchandising and brand messaging activities. Danier's strategy is also focused on increasing leather outerwear and sportswear sales, building brand awareness to drive more traffic to stores and grow profitable sales, and improving the effectiveness and efficiency of Danier's real estate on a broader company-wide basis.

"We have carefully assembled a high performance team with a proven track record in retail and fashion to drive the business and bring about profitable growth," said Mr. Wortsman. "The team is stronger, more experienced and focused on executing the various elements of our stated business strategy.

"While we recognize that change takes time to implement, we believe that the individuals who have joined Danier over the past several months are uniquely qualified and positioned to take us from strategy through to implementation and improved results."

                                                        
                   CONSOLIDATED STATEMENTS OF EARNINGS (LOSS)  
                         (In thousands, except per share)
                                                                            
                                 13 weeks ended               39 weeks ended
                         March 29,     March 30,      March 29,     March 30,
                             2014          2013           2014          2013

Revenue               $    31,011   $    37,400    $   117,221   $   126,626
Cost of sales              17,389        19,711         58,836        61,420
Gross profit               13,622        17,689         58,385        65,206
Selling, general
and
administrative
expenses                   19,367        18,828         59,823        59,638
Interest income               (44)          (65)           (90)         (168)
Interest expense               10             9             49            40
Earnings (loss)
before income
taxes                      (5,711)       (1,083)        (1,397)        5,696
Provision for
(recovery of)
income taxes               (1,425)         (200)          (414)        1,633
Net earnings (loss)
and comprehensive
earnings (loss)       $    (4,286)  $      (883)   $      (983)  $     4,063
Net earnings (loss)
per share
Basic                 $     (1.12)  $     (0.23)   $     (0.26)  $      0.95
Diluted               $     (1.12)  $     (0.23)   $     (0.26)  $      0.91

We seek Safe Harbor.