Trans World Entertainment Announces First Quarter 2006 Results

– Company Provides Guidance for 2006 –

ALBANY, N.Y., May 18 /PRNewswire-FirstCall/ — Trans World Entertainment
Corporation (Nasdaq: TWMC) today announced total sales for the first quarter
ended April 29, 2006 increased 1% to $288.5 million, compared to $285.4
million in the first quarter of 2005. For the first quarter of 2006, loss
before extraordinary gain was $8.0 million, or $0.26 per share. Net loss for
the first quarter of 2005 was $1.0 million, or $0.03 per share. The 2006
results include the operations of the Musicland stores acquired by the Company
on March 27, 2006. The Company is in the process of finalizing the purchase
accounting related to the Musicland acquisition, and expects to recognize an
extraordinary gain in the first quarter of 2006, which will be reflected in
the results presented in the Company’s Form 10-Q to be filed in June.
Comparable store sales in the first quarter of 2006 decreased 7%.

“Our first quarter results were in line with our expectation as we were
impacted by the sluggish performance of music and video games. We did see a
good performance in our DVD category helped by strong DVD releases and in
other categories supported by improved merchandising initiatives in these
businesses,” said Robert J. Higgins, Chairman and Chief Executive Officer of
Trans World Entertainment. “We expect second quarter comparable sales to be
low negative to flat and total sales to increase over 20% on an improved line-
up of music releases, continued strength in our DVD, improvement in video
games, growth in the electronics, accessories and trend categories and the
remerchandising of the acquired stores.”

Gross profit as a percentage of sales for the first quarter of 2006 was
34.8% versus 36.6% in the first quarter of 2005 reflecting increased
competitive pricing in the CD and DVD categories. SG&A as a percentage of
sales was 36.5% compared to 34.2% last year, which includes integration
expenses related to the purchase of Musicland of $2.0 million.

For fiscal year 2006, management expects income before extraordinary gain
in the range of $0.10 to $0.20 per share on sales of $1.6 billion. This range
assumes flat comparable store sales for the year, gross margin in the range of
34.0% and selling, general and administrative expense in the range of 31.0%.

“During 2006, we will strengthen our position as the market leader and
through our proven industry expertise extend Trans World’s leadership
position. Our integration of the Musicland chain is on track and we expect
the acquisition to be accretive in the third quarter,” Mr. Higgins concluded.

Trans World Entertainment is the nation’s largest specialty music and
video retailer. The Company operates over 1,100 retail stores in the United
States, the District of Columbia, the U.S. Virgin Islands, and Puerto Rico.
The Company operates mall stores under the f.y.e., Sam Goody and Suncoast
brands and freestanding locations under the names Coconuts Music and Movies,
Strawberries Music, Wherehouse, Sam Goody, Spec’s and Second Spin. The Company
also operates on the web at,,,, and

Certain statements in this release set forth management’s intentions,
plans, beliefs, expectations or predictions of the future based on current
facts and analyses. Actual results may differ materially from those indicated
in such statements. Additional information on factors that may affect the
business and financial results of the Company can be found in filings of the
Company with the Securities and Exchange Commission.

                                Financial Results

    (in millions, except per share data)
                                           Thirteen Weeks    Thirteen Weeks
                                               Ended            Ended
                                         April 29,   % to  April 30,   % to

                                           2006     Sales    2005     Sales

    Sales                                 $288.5            $285.4

    Cost of sales                          188.1     65.2%   180.8     63.4%
    Gross profit                           100.4     34.8%   104.6     36.6%

    Selling, general and
     administrative expenses               105.5     36.5%    97.7     34.2%

    Depreciation and amortization            8.6      3.1%     8.2      2.9%
    Loss from operations                   (13.7)    -4.8%    (1.3)    -0.5%

    Interest expense, net                    0.5      0.2%     0.2      0.1%

    Loss before income taxes and
     extraordinary gain - unallocated
     negative goodwill                     (14.2)    -5.0%    (1.5)    -0.6%
    Income tax benefit                      (6.2)    -2.2%    (0.5)    -0.3%

    Loss before extraordinary gain -
     unallocated negative goodwill         $(8.0)    -2.8%   $(1.0)    -0.4%

    Basic loss per common share:
    Loss per share before extraordinary
     gain - unallocated negative
     goodwill                             $(0.26)           $(0.03)

    Weighted average number of
     common shares outstanding - basic      30.6              32.9

    Diluted loss per common share:
    Loss per share before extraordinary
     gain - unallocated negative
     goodwill                             $(0.26)           $(0.03)

    Weighted average number of
     common shares outstanding - diluted    30.6              32.9

    (in millions, except store data)

    Cash and cash equivalents              $17.9             $68.0
    Merchandise inventory                  566.0             409.4
    Fixed assets (net)                     128.9             126.0
    Accounts payable                       252.3             185.2
    Borrowings under line of credit         35.6                 -
    Long-term debt, less current portion    18.6              16.5

    Stores in operation                    1,107               804

SOURCE Trans World Entertainment Corporation

CONTACT: John J. Sullivan, EVP, Chief Financial Officer of Trans World
+1-518-452-1242; or
Richard Tauberman of MWW Group,