Trans World Entertainment Announces Third Quarter Results

ALBANY, N.Y., Nov 10, 2004 /PRNewswire-FirstCall via COMTEX/ — Trans World Entertainment
Corporation (Nasdaq: TWMC) today reported total sales of $270.0 million for
its third quarter ended October 30, 2004, compared to $268.5 million for the
corresponding period last year. Comparable store sales decreased 2%. For the
quarter, the net loss was $4.6 million or $0.14 per share compared to a net
loss of $5.9 million or $0.16 per share for the comparable period in 2003.
Included in the net loss was an extraordinary gain of $0.6 million or $0.01
per share related to the Wherehouse acquisition in October of 2003. In the
third quarter last year, the extraordinary gain related to the Wherehouse
acquisition was $2.2 million or $0.06 per share.

“While games performed very well reflecting the improvements we have made
to product selection and merchandising, sales in our music and video
categories were slightly below expectations. Overall, we were able to deliver
better bottom line performance year over year through improved gross margins,”
commented Robert J. Higgins, Trans World’s Chairman and Chief Executive
Officer. “In October, we took a major step in our digital strategy with the
launch of the F.Y.E. Download Zone, a digital music service that will link the
online and in-store experience and that is also featured in the new Microsoft
Windows Media Player 10. We continue to focus our efforts on merchandising
and marketing to deliver a strong fourth quarter.”

In the third quarter, gross profit as a percentage of sales increased to
37.0% of sales compared to 35.9% in the third quarter of 2003. Selling,
general and administrative expenses (SG&A) increased to 37.4% of sales
compared to 37.1% of sales in the third quarter last year.

Sales for the thirty-nine week period ended October 30, 2004 were $851.7
million, compared to $788.7 million for the same period last year. Comparable
store sales for the period increased 0.8% over last year. Net income for the
thirty-nine week period was $7.2 million, or $0.20 per share compared to a net
loss of $13.9 million or $0.37 per share last year. Net income for the
thirty-nine week period of 2004 includes an income tax benefit of $10.5
million or $0.28 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. In the thirty-nine week period last
year, the extraordinary gain related to the Wherehouse acquisition was $2.2
million or $0.06 per share.

Mr. Higgins concluded, “Based on our expectations of improved new
releases for the holiday season, we are maintaining our 2004 earnings per
share projections of $0.93 to $0.98 per share before the extraordinary gain.
The earnings per share projections including the extraordinary gain related to
the Wherehouse acquisition will be in the range of $1.02 to $1.07 per share.”

Trans World Entertainment is a leading specialty retailer of music and
video products. The Company operates approximately 850 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.wherehouse.com,
http://www.coconuts.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       Thirty-nine Weeks Ended
                     Oct 30,   % to  Nov 1,  % to  Oct 30,  % to  Nov 1,  % to
                       2004   Sales   2003  Sales    2004  Sales   2003  Sales

    Sales            $270.0          $268.5        $851.7        $788.7

    Cost of sales     170.0   63.0%   172.2  64.1%  535.4  62.9%  498.2  63.2%
    Gross profit      100.0   37.0%    96.3  35.9%  316.3  37.1%  290.5  36.8%

    Selling, general
     and
     administrative
     expenses         100.9   37.4%    99.7  37.1%  302.5  35.5%  290.7  36.9%

    Depreciation and
     amortization       8.0    2.9%     9.5   3.6%   24.9   2.9%   29.1   3.7%
    Loss from
     operations        (8.9)  -3.3%   (12.9) -4.8%  (11.1) -1.3%  (29.3) -3.8%

    Interest expense    0.6    0.2%     0.5   0.2%    1.3   0.2%    1.1   0.1%

    Loss before income
     taxes and
     extraordinary
     gain              (9.5)  -3.5%   (13.4) -5.0%  (12.4) -1.5%  (30.4) -3.9%
    Income tax benefit (4.3)  -1.6%    (5.3) -2.0%  (16.4) -1.9%  (14.3) -1.9%

    Income (loss)
     before
     extraordinary
     gain             $(5.2)  -1.9%   $(8.1) -3.0%   $4.0   0.4% $(16.1) -2.0%
    Extraordinary gain
     - unallocated
     negative
     goodwill, net of
     income taxes      $0.6    0.2%    $2.2   0.8%   $3.2   0.4%   $2.2   0.3%

    NET INCOME (LOSS) $(4.6)  -1.7%   $(5.9) -2.2%   $7.2   0.8% $(13.9) -1.7%

    Basic income
     (loss) per common
     share:
    Income (loss)
     before
     extraordinary
     gain            $(0.15)         $(0.22)        $0.11        $(0.43)


    Extraordinary gain
     - unallocated
     negative
     goodwill, net of
     income taxes     $0.01           $0.06         $0.09         $0.06

    Basic income
     (loss) per
     share           $(0.14)         $(0.16)        $0.20        $(0.37)

    Weighted average
     number of
     common shares
     outstanding -
     basic             33.8            36.6          35.0          37.8

    Diluted income
     (loss) per common
     share:
    Income (loss)
     before
     extraordinary
     gain            $(0.15)         $(0.22)        $0.11        $(0.43)

    Extraordinary gain
     - unallocated
     negative
     goodwill, net of
     income taxes     $0.01           $0.06         $0.09         $0.06

    Diluted income
     (loss) per
     share           $(0.14)         $(0.16)        $0.20        $(0.37)

    Weighted average
     number of
     common shares
     outstanding -
     diluted           33.8            36.6          36.7          37.8

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

    Cash and cash
     equivalents                                    $18.7         $20.5
    Merchandise
     inventory                                      459.2         509.4
    Fixed assets (net)                              121.1         135.5
    Accounts payable                                224.8         277.3
    Long-term debt and
     capital lease
     obligations, less
     current portion                                 12.3           7.6

    Stores in
     operation at the
     end of the period                                852           950

SOURCE Trans World Entertainment Corporation

John Sullivan, Executive Vice President, Chief Financial
Officer, Trans World Entertainment Corporation, +1-518-452-1242 ext. 7400; or
Rich Tauberman, MWW Group, +1-201-507-9500, , for Trans
World Entertainment Corporation

http://www.twec.com