Trans World Entertainment Announces Fourth Quarter and Fiscal Year 2003 Results

– Company Provides Guidance for 2004 –

ALBANY, N.Y., Feb. 26 /PRNewswire-FirstCall/ — Trans World Entertainment
Corporation (Nasdaq: TWMC) today announced financial results for the fourth
quarter and fiscal year 2003. For the fourth quarter of 2003, the Company
reported net income of $36.9 million, or $0.99 per diluted share, that
includes an extraordinary gain related to the Company’s third quarter
acquisitions of Wherehouse Entertainment and CD World stores. Income before
the extraordinary gain was $34.8 million, or $0.93 per share. For the fourth
quarter of 2002, the Company reported a net loss of $4.8 million, or $0.12 per
share, which included a $40.9 million pre-tax write-off of goodwill. Total
sales for the fourth quarter of 2003 increased 12% to $542.0 million, compared
to $483.7 million in the prior year. Comparable store sales for the quarter
increased 4%.

In the fourth quarter of 2003, gross profit as a percentage of sales was
36.4%, compared to 35.9% for the same period in 2002. Selling, general and
administrative expenses as a percentage of sales were 24.1% in the fourth
quarter of 2003, compared to 23.7% of sales in the fourth quarter of 2002.

The fourth quarter 2003 results include a $3.7 million pre-tax charge to
write off long-lived assets related to the Company’s Internet operations. As
previously announced, BuyServices Inc. will assume responsibility for the
operation of Trans World’s website in August 2004, www.fye.com. The
functionality on the website will not change as a result of the outsourcing.

“We are very pleased with our sales and earnings results for the fourth
quarter and for the year, and, in particular, the increase in comparable store
sales for the second straight quarter. Comparable store sales continued to
increase into February 2004 on top of strong sales in the same month last
year,” commented Robert J. Higgins, Trans World’s Chairman and CEO. “These
results reflect the improvement in the music business and our increasing
market share in video and other entertainment categories. It also reflects the
strength of the FYE brand, our position as a total entertainment destination
and our ability to capitalize on opportunities resulting from industry
consolidation. At a time when many of our peers struggled, we were able to
post earnings that exceeded expectations through improved gross margin in all
major product lines and implementing expense and cost controls.”

Mr. Higgins added, “In line with our ongoing efforts to control costs,
outsourcing our online operations will allow us to focus on the core business
and the strong merchandising and marketing programs that have set us apart
from the competition. This strategic move will reduce our expenses by
approximately $3 million on an annual basis.”

Total sales for the fiscal year ended January 31, 2004 increased 4% over
last year to $1.3 billion. Comparable store sales increased 1%. Net income
for fiscal 2003 was $23.1 million, or $0.60 per diluted share, which includes
$4.3 million in extraordinary gain arising from the purchase of the net assets
of Wherehouse Entertainment Inc and CD World Inc. Income before the
extraordinary gain was $18.8 million, or $0.49 per share. For fiscal 2002, the
net loss was $45.5 million, or $1.13 per share.

“We expect to continue to improve our comparable store sales results
through a combination of improved releases in music, continued growth in DVD
and further development of our business initiatives. Continued efforts by the
music industry to reduce piracy will further drive more consumers back to the
stores and increase sales. During 2004 we will continue to leverage on our
improving sales and will persist in building the FYE brand as the premier
entertainment destination through marketing and technology strategies. We
will also look to capitalize on growth opportunities in the marketplace while
remaining focused on reducing the cost of doing business,” Mr. Higgins
concluded.

Management expects earnings in the range of $0.55 to $0.60 per share for
fiscal year 2004 on sales of $1.4 billion. In addition, management forecasts
gross margin of 36% with SG&A rates improving to the range of 30% to 31%.

Trans World Entertainment is a leading specialty retailer of music and
video products. The Company operates retail stores in 47 states, the District
of Columbia, the U.S. Virgin Islands, Puerto Rico and e-commerce sites,
www.fye.com and www.wherehouse.com. In addition to its mall locations,
operated primarily under the FYE brand, the Company also operates freestanding
locations under the names Coconuts Music and Movies, Strawberries Music,
Wherehouse Music, Spec’s and Planet Music.

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.


                    TRANS WORLD ENTERTAINMENT CORPORATION
                              Financial Results

    INCOME STATEMENTS:

    (in millions, except per share data)

                                             Thirteen Weeks Ended
                             January 31,       % to   February 1,         % to
                                  2004         Sales         2003        Sales

    Sales                        $542.0                   $ 483.7

    Cost of sales                 344.5        63.6%        310.2        64.1%
    Gross profit                  197.5        36.4%        173.5        35.9%

    Selling, general and
     administrative expenses      130.7        24.1%        114.7        23.7%

    FAS 141 impairment
     charge (1)                       -            -         40.9         8.5%

    Depreciation and
     amortization                   9.0         1.7%         10.4         2.2%
    Income (loss) from
     operations                    57.8        10.7%          7.5         1.6%

    Interest expense
     (income)                       0.4         0.1%          0.3         0.1%
    Income (loss) before income
     taxes, extraordinary gain -
     unallocated goodwill and
     cumulative effect of change
     in accounting principle       57.4        10.6%          7.2         1.4%

    Income tax expense (benefit)   22.6         4.2%         12.0         2.5%

    Income(Loss) before
     extraordinary gain -
     unallocated goodwill and
     cumulative effect of change
     in accounting principle      $34.8         6.4%        $(4.8)       -1.1%

    Extraordinary gain -
     unallocated negative
     goodwill, net of income
     taxes of $0.6 million for
     the thirteen weeks ended
     January 31, 2004, and $2.4
     million for the fiscal year    2.1         0.4%            -            -

    Cumulative effect of change
     in accounting principle,
     net of income taxes of
     $8.9 million                     -         0.0%            -            -

    Net income / (loss)           $36.9         6.8%        $(4.8)       -1.1%

    Basic earnings (loss) per
     common share:
    Earnings (loss) per share
     before extraordinary gain -
     unallocated negative goodwill
     (net of income taxes) and
     cumulative effect of change
     in accounting principle (net
     of income taxes of
     $8.9 million)                $0.96                    $(0.12)

    Extraordinary gain -
     unallocated negative
     goodwill, net of income
     taxes of $0.6 million for
     the thirteen weeks ended
     January 31, 2004, and $2.4
     million for the fiscal year  $0.06                       $ -

    Cumulative effect of change
     in accounting principle,
     net of income taxes of
     $8.9 million                   $ -                       $ -

    Basic earnings (loss) per
     common share                 $1.02                    $(0.12)

    Weighted average number of
     common shares outstanding     36.2                      39.5

    Diluted earnings (loss) per
     common share:
    Earnings (loss) per share
     before extraordinary gain -
     unallocated negative
     goodwill (net of income
     taxes) and cumulative
     effect of change in
     accounting principle (net
     of income taxes of
     $8.9 million)                $0.93                    $(0.12)

    Extraordinary gain -
     unallocated negative
     goodwill, net of income
     taxes of $0.6 million for
     the thirteen weeks ended
     January 31, 2004, and $2.4
     million for the fiscal year  $0.06                       $ -

    Cumulative effect of change
     in accounting principle,
     net of income taxes of
     $8.9 million                   $ -                       $ -

    Diluted earnings (loss)
     per common share             $0.99                    $(0.12)

    Weighted average number of
    common shares outstanding      37.5                      39.5


    INCOME STATEMENTS:

    (in millions, except per share data)
                                              Fiscal Year Ended
                              January 31,      % to      February 1,    % to
                                  2004        Sales         2003        Sales

    Sales                      $1,330.6                  $1,281.9

    Cost of sales                 842.7        63.3%        815.1        63.6%
    Gross profit                  487.9        36.7%        466.8        36.4%

    Selling, general and
    administrative expenses       421.3        31.7%        425.7        33.2%

    FAS 141 impairment
     charge (1)                       -            -         40.9         3.2%

    Depreciation and amortization  38.1         2.9%         40.2         3.1%
    Income (loss) from operations  28.5         2.0%        (40.0)       -3.1%

    Interest expense (income)       1.4         0.1%          1.1         0.1%

    Income (loss) before income
     taxes, extraordinary gain -
     unallocated goodwill and
     cumulative effect of change
     in accounting principle       27.1         1.9%        (41.1)       -3.2%

    Income tax expense (benefit)    8.3         0.6%         (9.3)       -0.7%

    Income(Loss) before
     extraordinary gain -
     unallocated goodwill and
     cumulative effect of
     change in accounting
     principle                    $18.8         1.4%      $(31.8)        -2.5%

    Extraordinary gain -
     unallocated negative
     goodwill, net of income
     taxes of $0.6 million for
     the thirteen weeks ended
     January 31, 2004, and $2.4
     million for the fiscal year    4.3         0.3%            -            -

    Cumulative effect of change
     in accounting principle, net
     of income taxes of
     $8.9 million                     -         0.0%       ($13.7)       -1.1%

    Net income / (loss)           $23.1         1.7%       $(45.5)       -3.6%

    Basic earnings (loss) per
     common share:
     Earnings (loss) per share
      before extraordinary gain -
      unallocated negative
      goodwill (net of income
      taxes) and cumulative effect
      of change in accounting
      principle (net of income
      taxes of $8.9 million)      $0.50                    $(0.79)

    Extraordinary gain -
     unallocated negative
     goodwill, net of income
     taxes of $0.6 million for
     the thirteen weeks ended
     January 31, 2004, and
     $2.4 million for the
     fiscal year                  $0.12                        $-

    Cumulative effect of
     change in accounting
     principle, net of
     income taxes of
     $8.9 million                    $-                    $(0.34)

    Basic earnings (loss) per
     common share                 $0.62                    $(1.13)

    Weighted average number of
    common shares outstanding      37.4                      40.2

    Diluted earnings (loss)
     per common share:
     Earnings (loss) per share
     before extraordinary gain -
     unallocated negative
     goodwill (net of income
     taxes) and cumulative effect
     of change in accounting
     principle (net of income
     taxes of $8.9 million)       $0.49                    $(0.79)

    Extraordinary gain -
     unallocated negative
     goodwill, net of income
     taxes of $0.6 million for
     the thirteen weeks ended
     January 31, 2004, and
     $2.4 million for the
     fiscal year                  $0.11                        $-

    Cumulative effect of change
     in accounting principle,
     net of income taxes of
     $8.9 million                    $-                    $(0.34)

    Diluted earnings (loss)
     per common share             $0.60                    $(1.13)

    Weighted average number of
    common shares outstanding      38.2                      40.2


    SELECTED BALANCE SHEET CAPTIONS:
    (in millions, except
     store data)
    Cash and cash equivalents    $191.2                    $197.0
    Merchandise inventory         424.8                     378.0
    Fixed assets (net)            125.7                     155.4
    Accounts payable              306.2                     326.9
    Long-term debt and capital
     lease obligations, less
     current portion                7.5                       7.9

    Stores in operation             881                       855

    (1) The non-cash impairment charge in fiscal 2003 relates to Statement of
        Financial Accounting Standard (SFAS) No. 141, concerning the
        accounting for goodwill. In accordance with SFAS No. 141, the Company
        determined that its entire goodwill balance of $40.9 million was
        impaired and the entire amount was written off in fiscal 2002.

SOURCE Trans World Entertainment Corporation
02/26/2004
CONTACT: John Sullivan, Executive Vice President and Chief Financial
Officer of Trans World Entertainment Corporation, +1-518-452-1242, ext. 7400;
or Kimberly Storin, Investor Relations Counsel of The MWW Group,
+1-212-704-9727, , for Trans World Entertainment Corporation/
/Web site: http://www.fye.com
http://www.wherehouse.com
(TWMC)