Trans World Entertainment Announces Second Quarter 2006 Results

ALBANY, N.Y., Aug. 17 /PRNewswire-FirstCall/ — Trans World Entertainment
Corporation (Nasdaq: TWMC) today announced total sales increased 18% to $298.3
million for the second quarter ended July 29, 2006, compared to $253.1 million
in the second quarter of 2005. The sales increase was due to the Musicland
acquisition, partially offset by a comparable store sales decrease of 7%. For
the second quarter of 2006, the Company incurred a net loss of $7.7 million,
or $0.25 per share. During the quarter, the Company recorded an extraordinary
gain for unallocated negative goodwill of $2.5 million, net of income tax
related to the acquisition of Musicland. Loss before the extraordinary gain
was $10.2 million, or $0.33 per share. The net loss for the second quarter of
2005 was $7.0 million or $0.21 per share.

“We were pleased with our comparable store sales results for DVD,
Electronics and Games. However, the increases in these categories did not
offset the continued weakness in the music category,” said Robert J. Higgins,
Chairman and Chief Executive Officer of Trans World Entertainment.

Gross profit as a percentage of sales for the second quarter of 2006 was
35.6% versus 36.7% in the second quarter of 2005. SG&A as a percentage of
sales was 40.2% compared to 37.4% last year. Included in SG&A this year is
$4.4 million in transition costs associated with the acquisition of Musicland.

Sales for the twenty-six week period ended July 29, 2006 were $586.8
million, compared to $538.5 million in 2005. Net loss for the twenty-six week
period was $14.8 million or $0.48 per share compared to $7.9 million or $0.24
per share in 2005. Loss before extraordinary gain for the twenty-six week
period was $18.2 million or $0.59 per share.

“During the quarter we successfully completed the integration of the
recently acquired Musicland stores into our portfolio and expect our
comparable store sales trends to improve in the second half of the year. The
DVD and Games categories will continue to be positive and we expect improved
music results,” concluded Mr. Higgins.

Trans World Entertainment is a leading specialty retailer of music, video
and video game products. The Company operates nearly 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 www.fye.com, www.coconuts.com,
www.wherehouse.com, www.secondspin.com, www.samgoody.com and www.suncoast.com.

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       Twenty-six Weeks Ended
                      July 29, % to July 30, % to July 29, % to July 30, % to
                        2006   Sales  2005   Sales  2006   Sales  2005   Sales

    Sales              $298.3        $253.1        $586.8        $538.5

    Cost of sales       192.1  64.4%  160.2  63.3%  380.1  64.8%  341.1  63.3%
    Gross profit        106.2  35.6%   92.9  36.7%  206.7  35.2%  197.4  36.7%

    Selling, general
     and
       administrative
        expenses        119.8  40.2%   94.8  37.4%  225.3  38.4%  192.4  35.7%

    Depreciation and
     amortization         9.1   3.0%    8.4   3.3%   17.7   3.0%   16.6   3.1%
    Loss from
     operations         (22.7) -7.6%  (10.3) -4.0%  (36.3) -6.2%  (11.6) -2.1%

    Other income         (3.6) -1.2%   (1.1) -0.5%   (4.0) -0.7%   (1.4) -0.3%

    Interest expense      1.5   0.5%    0.7   0.2%    2.4   0.4%    1.2   0.2%

    Loss before income
     taxes and
     extraordinary
    gain - unallocated
     negative goodwill  (20.6) -6.9%   (9.9) -3.8%  (34.7) -5.9%  (11.4) -2.1%
    Income tax benefit  (10.4) -3.5%   (2.9) -1.1%  (16.5) -2.8%   (3.5) -0.6%

    Loss before
     extraordinary
     gain -
    unallocated
     negative goodwill $(10.2) -3.4%  $(7.0) -2.7% $(18.2) -3.1%  $(7.9) -1.5%
    Extraordinary gain
     - unallocated
     negative
    goodwill, net of
     income taxes         2.5   0.8%   $-     0.0%    3.4   0.6%   $-     0.0%

    NET LOSS            $(7.7) -2.6%  $(7.0) -2.7% $(14.8) -2.5%  $(7.9) -1.5%

    Basic loss per
     common share:
    Loss per share
     before
     extraordinary
     gain -
    unallocated
     negative goodwill $(0.33)       $(0.21)       $(0.59)       $(0.24)

    Extraordinary gain
     - unallocated
     negative           $0.08          $-           $0.11          $-
    goodwill, net of
     income taxes

    Basic loss per
     share             $(0.25)       $(0.21)       $(0.48)       $(0.24)

    Weighted average
     number of
       common shares
        outstanding -
        basic            30.8          32.5          30.7          32.7

    Diluted loss per
     common share:
    Loss per share
     before
     extraordinary
     gain -
    unallocated
     negative goodwill $(0.33)       $(0.21)       $(0.59)       $(0.24)

    Extraordinary gain
     - unallocated
     negative           $0.08          $-           $0.11          $-
    goodwill, net of
     income taxes

    Diluted loss per
     share             $(0.25)       $(0.21)       $(0.48)       $(0.24)

    Weighted average
     number of
       common shares
        outstanding -
        diluted          30.8          32.5          30.7          32.7


    SELECTED BALANCE SHEET CAPTIONS:
    (in millions, except store data)

    Cash and cash
     equivalents                                    $18.2         $50.9
    Merchandise
     inventory                                      505.5         401.1
    Fixed assets (net)                              135.7         128.5
    Accounts payable                                211.3         182.2
    Borrowings under
     line of credit                                  40.7           -
    Long-term debt,
     less current
     portion                                         17.7          20.9

    Stores in
     operation                                      1,091           797

SOURCE Trans World Entertainment Corporation

CONTACT: John J. Sullivan,
EVP, Chief Financial Officer of Trans World
Entertainment,
+1-518-452-1242; or
Richard Tauberman of MWW Group
for Trans
World Entertainment Corporation,
+1-201-507-9500,