Exhibit 99.1

CONTACT:

Jon Faulkner

Chief Financial Officer

706-876-5814

jon.faulkner@dixiegroup.com

THE DIXIE GROUP REPORTS SECOND QUARTER 2010 RESULTS

CHATTANOOGA, Tenn. (July 28, 2010) -- The Dixie Group, Inc. (NASDAQ:DXYN) today reported financial results for the second quarter and six months ended June 26, 2010.  In the second quarter of 2010, the Company had net sales of $59,058,000 versus $52,572,000 in the same quarter of 2009.  Including facility consolidation and severance expenses, the Company reported an after-tax loss from continuing operations of $684,000, or $0.05 per diluted share, in the quarter, compared with a loss from continuing operations of $984,000, or $0.08 per diluted share, for same quarter of 2009.  

For the six months ended June 26, 2010, the Company had net sales of $109,512,000, versus $100,211,000, in the six months ended June 27, 2009. Including facility consolidation and severance expenses, the Company reported an after-tax loss from continuing operations of $3,143,000, or $0.25 per diluted share, compared with a loss from continuing operations of $36,425,000, or $2.97 per diluted, for the six months ended June 27, 2009.

The first six months of 2010 had pre-tax facility consolidation and severance expenses of $333,000.  Comparatively, the first six months of 2009 had pre-tax facility consolidation and severance expenses and impairment of goodwill of $33,138,000, as well as liquidations of LIFO inventory carried at lower costs established in prior years, increasing pre-tax income by $1,020,000.

Commenting on the results, Daniel K. Frierson, Chairman and Chief Executive Officer, said, “During the second quarter, we experienced significant improvement in revenue.  Carpet sales for the second quarter were 17.0% above those of the first quarter and 12.8% above the same quarter last year, while the industry was up only 1.7% over the year-ago quarter.   

“Our growth was most notable in our residential business, with strong performances in the high-end through numerous new wool offerings at Fabrica and Masland and our unique Masland Avenue collection.  Dixie Home showed significant growth in its Durasilk products, and all three brands continued growth of the Stainmaster® brand, with a number of new Luxurelle products.

“Our sales in the commercial sector were flat with the prior-year period which we believe slightly exceeds the industry performance for the period.  We continue to introduce new products in the fastest growing segments of our markets as we strive to maintain our style and design leadership.

“Margins for the quarter were 25.8%, an improvement over the first quarter of 1.3 percentage points but below the prior-year’s quarter by 1.5 percentage points. The prior-year margin of 27.3% included a favorable $1.0 million LIFO tier liquidation gain.  The margin for second quarter 2010 had both a less favorable mix across our markets as more value oriented products gained in share. Our residential margins were under pressure during the period as we suffered higher costs resulting from material cost increases while the effect of our corresponding price increases did not become fully effective until July.  

 “Our cost reduction efforts continue as we work to make progress to return to profitability during this uncertain period in the marketplace.  We have seen improvement in our results as we had a positive non-GAAP operating income, adjusted for facility consolidation and severance expenses, of $181,000, for the second quarter as compared to a loss on the same basis of $341,000, for the second quarter of 2009.  We plan to continue to drive down costs through strict controls on overtime, spending and improved operating efficiencies as we reap the benefits of returning our tufting and yarn operations to full staffing during the second quarter.

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DXYN Reports Second Quarter Results

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July 28, 2010

“Though the consolidation of our West Coast facilities is physically complete, we continue to incur facility costs for our Pullman facility and software integration charges.  We continue to offer the Pullman facility for sublease.

“Our inventories and receivables grew during the period to support the higher level of sales.  Despite the increases, our inventory turns improved 10% over the prior quarter and 27% versus the same period a year ago as part of our efforts to improve utilization of working capital.  Capital expenditures for the first six months were a relatively modest $247,000.  We still anticipate total capital expenditures for the year will be approximately $3.0 million compared to $11.7 million of depreciation and amortization.  Availability under our loan agreements was $10.7 million at the end of the quarter.

“We are committed to return to profitability as we support those market segments and product lines that are experiencing growth.  Despite a weakening of sales during June as compared to the rest of the quarter, we anticipate a recovering residential market ahead of the commercial sector.  We are moving forward with product introductions in design-oriented rug, wool, Stainmaster® and Durasilk products.  We continue the diligent pursuit of profitable growth opportunities while controlling costs and minimizing capital expenditures,” concluded Frierson.

The Company’s loss from discontinued operations was $60,000, or $0.01 per diluted share, for the second quarter of 2010, compared with a loss from discontinued operations of $83,000, or $0.01 per diluted share, for the prior-year period.  Including discontinued operations, the Company reported a net loss of $744,000, or $0.06 per diluted share, for the second quarter of 2010 compared with a net loss of $1,067,000, or $0.09 per diluted share, for the year-earlier period. The Company's loss from discontinued operations was $130,000, or $0.01 per diluted share, for the six months ended June 26, 2010, compared with a loss from discontinued operations of $199,000, or $0.02 per diluted share, for the six months ended June 27, 2009.  Including discontinued operations, the Company reported a net loss of $3,273,000, or $0.26 per diluted share, for the first six months of 2010 compared with a net loss of $36,624,000, or $2.99 per diluted share for the prior period.

A listen-only Internet simulcast and replay of Dixie's conference call may be accessed with appropriate software at the Company's website or at www.earnings.com.  The simulcast will begin at approximately 11:00 a.m. Eastern Time on July 28, 2010.  A replay will be available approximately two hours later and will continue for approximately 30 days.  If Internet access is unavailable, a listen-only telephonic conference will be available by dialing (913) 312-0673 at least ten minutes before the appointed time. A seven-day telephonic replay will be available two hours after the call ends by dialing (719) 457-0820 and entering 2409243 when prompted for the access code.

The Dixie Group (www.thedixiegroup.com) is a leading marketer and manufacturer of carpet and rugs to higher-end residential and commercial customers through the Fabrica International, Masland Carpets, Dixie Home, Masland Contract and Whitespace brands.

Statements in this news release, which relate to the future, are subject to risk factors and uncertainties that could cause actual results to differ materially from those indicated in such forward-looking statements.  Such factors include the levels of demand for the products produced by the Company.  Other factors that could affect the Company's results include, but are not limited to, raw material and transportation costs related to petroleum prices, the cost and availability of capital, and general economic and competitive conditions related to the Company's business. Issues related to the availability and price of energy may adversely affect the Company's operations.  Additional information regarding these and other risk factors and uncertainties may be found in the Company's filings with the Securities and Exchange Commission.

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DXYN Reports Second Quarter Results

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July 28, 2010

THE DIXIE GROUP, INC.

Consolidated Condensed Statements of Operations

(unaudited; in thousands, except earnings per share)

			Three Months Ended				Six Months Ended
			June 26, 2010		June 27, 2009		June 26, 2010		June 27, 2009
NET SALES		$	59,058	$	52,572	$	109,512	$	100,211
	Cost of sales		43,821		38,231		81,922		76,255
GROSS PROFIT			15,237		14,341		27,590		23,956
	Selling and administrative expenses		15,026		14,864		29,384		30,481
	Other operating income		(61)		(306)		(120)		(348)
	Other operating expense		91		124		220		305
	Facility consolidation and severance    expenses		122		117		333		1,732
	Impairment of goodwill		---		---		---		31,406
OPERATING INCOME (LOSS)			59		(458)		(2,227)		(39,620)
	Interest expense		1,082		1,410		2,317		2,896
	Other income		(10)		(14)		(22)		(319)
	Other expense		307		---		317		21
Loss from continuing operations before    income taxes			(1,320)		(1,854)		(4,839)		(42,218)
	Income tax benefit		(636)		(870)		(1,696)		(5,793)
Loss from continuing operations			(684)		(984)		(3,143)		(36,425)
Loss from discontinued operations,    net of tax			(60)		(83)		(130)		(199)
NET LOSS		$	(744)	$	(1,067)	$	(3,273)	$	(36,624)
BASIC EARNINGS (LOSS) PER SHARE:
	Continuing operations	$	(0.05)	$	(0.08)	$	(0.25)	$	(2.97)
	Discontinued operations		(0.01)		(0.01)		(0.01)		(0.02)
	Net loss	$	(0.06)	$	(0.09)	$	(0.26)	$	(2.99)
DILUTED EARNINGS (LOSS) PER SHARE:
	Continuing operations	$	(0.05)	$	(0.08)	$	(0.25)	$	(2.97)
	Discontinued operations		(0.01)		(0.01)		(0.01)		(0.02)
	Net loss	$	(0.06)	$	(0.09)	$	(0.26)	$	(2.99)
Weighted-average shares outstanding:
	Basic		12,532		12,287		12,514		12,261
	Diluted		12,532		12,287		12,514		12,261

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DXYN Reports Second Quarter Results

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July 28, 2010

THE DIXIE GROUP, INC.

Consolidated Condensed Balance Sheets

(in thousands)

				June 26, 2010		December 26, 2009
ASSETS				(Unaudited)
Current Assets
	Cash and cash equivalents		$	89	$	56
	Receivables, net			23,974		26,150
	Inventories			59,166		55,156
	Other			5,344		4,683
		Total Current Assets		88,573		86,045
Net Property, Plant and Equipment				74,171		79,756
Other Assets				12,196		13,255
TOTAL ASSETS			$	174,940	$	179,056
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities
	Accounts payable and accrued expenses		$	31,159	$	24,745
	Current portion of long-term debt			7,402		8,434
		Total Current Liabilities		38,561		33,179
Long-Term Debt
	Senior indebtedness			44,427		46,480
	Capital lease obligations			536		707
	Convertible subordinated debentures			9,662		12,162
Deferred Income Taxes				4,734		5,830
Other Liabilities				12,167		13,191
Stockholders' Equity				64,853		67,507
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY			$	174,940	$	179,056

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DXYN Reports Second Quarter Results

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July 28, 2010

Use of Non-GAAP Financial Information:

The company believes that non-GAAP performance measures, which management uses in evaluating the Company's business, may provide users of the Company's financial information with additional meaningful basis for comparing the Company's current results and results in a prior period, as these measures reflect factors that are unique to one period relative to the comparable period.  However, the non-GAAP performance measures should be viewed in addition to, not as an alternative for, the Company's reported results under accounting principles generally accepted in the United States.  

The Company defines Adjusted Operating Income as Operating Income plus facility consolidation expenses and severance expenses.

	Three Months Ended
	June 26, 2010	June 27, 2009
Reconciliation of Operating Income / (Loss):
Operating Income / (Loss)	59	(458)
Add: Facility consolidation and severance expenses	122	117
Non-GAAP Adjusted Operating Income	$ 181	$ (341)

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