Trans World Entertainment Announces Fourth Quarter and Fiscal Year 2004 Results

– Company Provides Guidance For 2005 –

ALBANY, N.Y., Feb 24, 2005 /PRNewswire-FirstCall via COMTEX/ — Trans World Entertainment
Corporation (Nasdaq: TWMC) today reported financial results for its fourth
quarter and fiscal year 2004. For the quarter, comparable store sales
increased 1%. Total sales decreased 5% to $513.5 million. During the quarter,
the Company operated an average of 831 stores compared to 916 stores in the
fourth quarter of last year. Net income was $34.7 million, or $0.98 per
share. For the fourth quarter of 2003, the Company reported income before
extraordinary gain of $34.8 million, or $0.93 per share. Net income for the
fourth quarter of 2003 was $36.9 million, or $0.99 per share, including an
extraordinary gain of $2.1 million related to the Wherehouse acquisition
completed in October 2003.

In the fourth quarter, gross profit as a percentage of sales was 34.8%,
compared to 36.4% for the same period last year. Selling, general and
administrative expenses as a percentage of sales decreased to 22.0%, compared
to 24.1% of sales last year.

“We are pleased with our results for the fourth quarter and for the year.
Despite a challenging retail environment, we recorded our eighth consecutive
quarter of year-over-year earning per share gains, reflecting the strength of
our FYE brand and our ability to translate our strategy and vision as a total
entertainment destination,” commented Robert J. Higgins, Trans World’s
Chairman and CEO. “Our solid performance in DVD and video games, which grew
15% and 11% respectively during the quarter, on a comparable store basis,
reflects our increasing concentration in these categories. The music category
was down during the quarter as several scheduled new releases were postponed
until the first quarter of this year.”

Sales for fiscal year 2004 increased 3% to $1.365 billion. Comparable
store sales increased 1%. Net income was $41.8 million, or $1.15 per share
compared to $23.1 million, or $0.60 per share last year. Net income for 2004
includes an income tax benefit of $10.5 million, or $0.29 per diluted share,
the result of closing a federal income tax examination, and an extraordinary
gain of $3.2 million, or $0.09 per share, related to the Wherehouse
acquisition. The aggregate effect of these items increased net income
$13.7 million or $0.38 per diluted share. Excluding the income tax benefit,
income before extraordinary gain for fiscal 2004 was $28.1 million, or $0.77
per diluted share. For fiscal year 2003, the extraordinary gain related to the
Wherehouse acquisition was $4.3 million or $0.11 per share. Income before
extraordinary gain for fiscal 2003 was $18.8 million, or $0.49 per diluted
share.

Management expects earnings in the range of $0.85 to $0.90 per share for
fiscal year 2005 on sales of $1.4 billion. This range assumes a gain in
comparable store sales of 1% to 3%, gross margin between 36.0% and 36.5% and
selling, general and administrative expense between 29.5% and 30.0%.

“Our strong fourth quarter results support our outlook for 2005. During
2005, we will further leverage our strong financial position and proven
industry expertise to extend Trans World’s leadership position. Our strategy
will focus on delivering to our customers the entertainment they want, where
and when they want it, by maintaining an unmatched store portfolio and a
superior on-line presence. We are pleased with the initial rollout of the FYE
Download Zone, our subscription-based digital music service, where consumers
can access over a million songs for $14.95 per month and are looking forward
to the launch of our next generation in store listening and viewing stations
in the second half of this year, which will support digital downloading in our
stores,” Mr. Higgins concluded.

Trans World Entertainment is a leading specialty retailer of music, video
and video game products. The Company operates over 800 retail stores in 47
states, the District of Columbia, the U.S. Virgin Islands, Puerto Rico and
e-commerce sites, http://www.fye.com, http://www.coconuts.com,
http://www.wherehouse.com and http://www.secondspin.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, CD World, Spec’s, Second Spin 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 29,  % to  January 31,  % to
                                               2005   Sales     2004    Sales
    Sales                                    $513.5           $542.0

    Cost of sales                             334.7   65.2%    344.5   63.6%
    Gross profit                              178.8   34.8%    197.5   36.4%

    Selling, general and administrative
     expenses                                 113.1   22.0%    130.7   24.1%

    Depreciation and amortization               9.6    1.9%      9.0    1.7%
    Income from operations                     56.1   10.9%     57.8   10.7%

    Interest expense                            0.1    0.0%      0.4    0.1%
    Income before income taxes and
     extraordinary gain - unallocated
     goodwill                                  56.0   10.9%     57.4   10.6%

    Income tax expense                         21.3    4.1%     22.6    4.2%

    Income before extraordinary gain -
     unallocated goodwill                     $34.7    6.8%    $34.8    6.4%

    Extraordinary gain - unallocated
     negative goodwill, net of income
     taxes of $2.0 million for fiscal
     2004, $0.6 million for the thirteen
     weeks ended January 31, 2004, and
     $2.4 million for fiscal 2003               -      0.0%      2.1    0.4%

    Net income                                $34.7    6.8%    $36.9    6.8%

    Basic earnings per common share:
    Earnings per share before
     extraordinary gain - unallocated
     negative goodwill (net of income
     taxes)                                   $1.04            $0.96

    Extraordinary gain - unallocated
     negative goodwill, net of income
     taxes of $2.0 million for fiscal
     2004, $0.6 million for the thirteen
     weeks ended January 31, 2004, and
     $2.4 million for fiscal 2003              $-              $0.06

    Basic earnings per common share           $1.04            $1.02

    Weighted average number of
     common shares outstanding                 33.2             36.2

    Diluted earnings per common share:
    Earnings per share before
     extraordinary gain - unallocated
     negative goodwill (net of income
     taxes)                                   $0.98            $0.93

    Extraordinary gain - unallocated
     negative goodwill, net of income
     taxes of $2.0 million for fiscal
     2004, $0.6 million for the thirteen
     weeks ended January 31, 2004, and
     $2.4 million for fiscal 2003              $-              $0.06

    Diluted earnings per common share         $0.98            $0.99

    Weighted average number of
     common shares outstanding                 35.2             37.5

    SELECTED BALANCE SHEET CAPTIONS:
    (in millions, except store data)
    Cash and cash equivalents
    Merchandise inventory
    Fixed assets (net)
    Accounts payable
    Long-term debt and capital lease
     obligations, less current portion

    Stores in operation


                    TRANS WORLD ENTERTAINMENT CORPORATION
                              Financial Results

    INCOME STATEMENTS:

    (in millions, except per share data)           Fiscal Year Ended
                                         January 29,  % to  January 31,  % to
                                               2005   Sales     2004    Sales
    Sales                                   $1,365.1         $1,330.6

    Cost of sales                              870.0  63.7%     842.7  63.3%
    Gross profit                               495.1  36.3%     487.9  36.7%

    Selling, general and administrative
     expenses                                  415.7  30.5%     421.3  31.7%

    Depreciation and amortization               34.5   2.5%      38.1   2.9%
    Income from operations                      44.9   3.4%      28.5   2.1%

    Interest expense                             1.4   0.1%       1.4   0.1%
    Income before income taxes and
     extraordinary gain - unallocated
     goodwill                                   43.5   3.3%      27.1   2.0%

    Income tax expense                           4.9   0.4%       8.3   0.6%

    Income before extraordinary gain -
     unallocated goodwill                      $38.6   2.9%     $18.8   1.4%

    Extraordinary gain - unallocated
     negative goodwill, net of income
     taxes of $2.0 million for fiscal
     2004, $0.6 million for the thirteen
     weeks ended January 31, 2004, and
     $2.4 million for fiscal 2003                3.2   0.2%       4.3   0.3%

    Net income                                 $41.8   3.1%     $23.1   1.7%

    Basic earnings per common share:
    Earnings per share before
     extraordinary gain - unallocated
     negative goodwill (net of income
     taxes)                                    $1.12            $0.50

    Extraordinary gain - unallocated
     negative goodwill, net of income
     taxes of $2.0 million for fiscal
     2004, $0.6 million for the thirteen
     weeks ended January 31, 2004, and
     $2.4 million for fiscal 2003              $0.09            $0.12

    Basic earnings per common share            $1.21            $0.62

    Weighted average number of
     common shares outstanding                  34.5             37.4

    Diluted earnings per common share:
    Earnings per share before
     extraordinary gain - unallocated
     negative goodwill (net of income
     taxes)                                    $1.06            $0.49

    Extraordinary gain - unallocated
     negative goodwill, net of income
     taxes of $2.0 million for fiscal
     2004, $0.6 million for the thirteen
     weeks ended January 31, 2004, and
     $2.4 million for fiscal 2003              $0.09            $0.11

    Diluted earnings per common share          $1.15            $0.60

    Weighted average number of
    common shares outstanding                   36.3             38.2

    SELECTED BALANCE SHEET CAPTIONS:
    (in millions, except store data)
    Cash and cash equivalents                 $229.8           $191.2
    Merchandise inventory                      431.2            424.8
    Fixed assets (net)                         130.2            125.7
    Accounts payable                           358.4            306.2
    Long-term debt and capital lease
     obligations, less current portion          12.0              7.5

    Stores in operation                          810              881

SOURCE Trans World Entertainment Corporation

John J. Sullivan, EVP, Chief Financial Officer of Trans World Entertainment,
+1-518-452-1242; or Rich Tauberman of MWW Group, +1-201-507-9500, 
for Trans World Entertainment Corporation
http://www.prnewswire.com