Diplomat Direct Marketing Corporation Reports Third-Quarter and Nine-Month Results.

TEANECK, N.J.--(BUSINESS WIRE)--Aug. 20, 1999--

Diplomat Direct Marketing Corporation's (Nasdaq:DIPL) net sales for the third quarter ended June 30, 1999, were $15,380,425 compared with net sales of $20,603,127 for the same period a year ago. The net loss for the quarter was $3,299,708 compared with a net income of $99,317 in the corresponding period a year ago. The net loss per common share in the quarter was $0.23 basic and $0.22 diluted, compared with net earnings per share of $0.00 basic and $0.01 diluted in the same period of 1998.

For the nine months ended June 30, 1999, the company reported net sales of $56,442,962, compared to net sales of $57,118,755 in the corresponding period a year ago. The net loss for the nine months totaled $7,678,414 compared with a net loss of $199,387 in the same period of 1998. The net loss per share was $0.63 basic and $0.61 diluted, compared with a net loss per share of $0.04 basic and $0.01 diluted for the same period a year ago.

The company attributed the third quarter loss to reduced net sales while expenses remained constant. Net sales declined due to fewer catalogs being mailed during the quarter and more order cancellations and sellouts. The company, whose sales historically vary proportionate to the number of catalogs mailed, distributed 8 million Lew Magram(R) and Brownstone(R) catalogs during the third quarter of fiscal 1999 as compared to 14 million catalogs during the same quarter of fiscal 1998. The company has also been unable to obtain sufficient vendor credit due to the company's inadequate working capital. The lack of sufficient credit has resulted in delays in delivery of merchandise that resulted in a larger percentage of merchandise orders being cancelled by customers or cancellation by the company because merchandise could not be delivered. In spite of the reduction of net sales, expenses, however, remained the same as the third quarter of one year ago, which is attributable to the increase in catalog production costs which are typically written off over the sales life of the catalog. The life of the catalog in this period was reduced as a result of the company's inability to mail books over a regular catalog schedule.

"We are very disappointed with these results," said Warren H. Golden, Chief Executive Officer, "and these losses have resulted in a significant cash shortage for the company. We believe that if we can improve our working capital, we would be able to obtain the necessary vendor credit to timely deliver merchandise to our customers and reduce cancellations and sellouts. We are currently pursuing several alternatives to improve our working capital and cash positions."

The company has previously announced that it has restructured its asset based credit facility. The company, however, has borrowed the maximum available under the facility and has obtained additional funds only to meet immediate cash needs. The company also plans to sell in a public offering 2 million shares of common stock after giving effect to a 1-for-6 reverse stock split, which the company plans to close in September 1999. The public offering will be made only by means of a prospectus. The company can not assure, however, that a public offering will be completed. Finally, as a result of the company's severe cash shortage, the company has significantly reduced cash expenditures. It is too early to determine whether such reductions will be sufficient to effectively meet the company's financial obligations.

Diplomat Direct Marketing Corporation is a leading direct marketing company of high quality women's fashion apparel and accessories sold through its Lew Magram(R) and Brownstone Studio(R) mail order catalogs and on the internet. Diplomat also sells apparel and accessories for babies and toddlers to mass merchandisers under the brand name Ecology Kids(R). For further information, contact: Diplomat at (201) 833-4450, ext 3900 or visit Diplomat's web site at www.diplomatdirect.com.

Disclaimer: This news release contains forward-looking statements as defined by the Private Securities Litigation Reform Act of 1995. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance and underlying assumptions and other statements, which are other than statements of historical facts. These statements are subject to uncertainties and risks including, but not limited to, product and service demand and acceptance, changes in technology, economic conditions, the impact of competition and pricing, government regulation, and other risks defined in this document and in statements filed from time to time with the Securities and Exchange Commission. All such forward-looking statements, whether written or oral, and whether made by, or on behalf of, the company, are expressly qualified by these cautionary statements and any other cautionary statements which may accompany the forward-looking statements. In addition, the company disclaims any obligation to update any forward-looking statements to reflect events or circumstances after the date hereof.