Hanover Direct Announces Nine Month Operating Results for Fiscal 2003; Internet Sales Continue Strong Growth; and Income from Op

Hanover Direct Announces Nine Month Operating Results for Fiscal 2003; Internet
Sales Continue Strong Growth; and Income from Operations Improves by $1.9
million 


EDGEWATER, N.J., Nov. 10  /PRNewswire-FirstCall/ -- Hanover Direct, Inc. today
announced operating results for the 13- and 39- weeks ended September 27, 2003.

The Company reported that internet sales continue to demonstrate strong growth
over the prior year reaching 27.6% of total revenues for the 39-week period
ended September 27, 2003.  Internet net revenues for the 13- and 39- week
periods ended September 27, 2003 were $26.2 million and $79.2 million,
respectively, or 21.3% and 28.3% above comparable fiscal periods in 2002.  Total
net revenues for the 13- and 39- weeks ended September 27, 2003 were $96.6
million and $304.9 million, respectively, a decrease of $9.4 million (8.9%) and
$24.5 million (7.4%), respectively, from the prior year 13- and 39-week results.
 The decreases were due to a number of factors including softness in the market
for the Company's products and continued reductions in unprofitable
circulation.

Hanover reported income from operations for the 39-weeks ended September 27,
2003 of $1.5 million, a $1.9 million improvement over a reported loss from
operations of $0.4 million for the comparable period in 2002.  The improvement
in operating income was due to the continued reduction of general and
administrative expenses of $5.9 million and a decrease in special charges of
$1.0 million which were partially offset by the impact of the decline in total
net revenues. Hanover also reported a loss from operations for the 13- weeks
ended September 27, 2003 of $(0.1) million, an improvement of $2.8 million over
the comparable period in 2002.

The Company reported a net loss of $15.8 million for the 39- weeks ended
September 27, 2003 compared with a net loss of $4.2 million for the comparable
period in the year 2002.  The $11.6 million increase in net loss was primarily
due to an $11.3 million deferred Federal income tax provision incurred to
establish a valuation allowance against the Company's remaining net deferred tax
asset.  In addition, the increase in net loss was also due to the recording of
$4.5 million of additional interest expense incurred as a result of the
implementation of SFAS No. 150, "Accounting for Certain Financial Instruments
with Characteristics of both Liabilities and Equity" ("FAS 150") issued by the
Financial Accounting Standards Board. Effective June 29, 2003, because the
Company's Series B Participating Preferred Stock ("Preferred Stock") is
mandatorily redeemable, FAS 150 required the Company to reclassify its Preferred
Stock to liabilities and to prospectively reflect the accretion of the Preferred
Stock balance as interest expense rather than Preferred Stock dividends.  These
charges were partially offset by continued reductions in general and
administrative expenses, a decrease in special charges and depreciation and
amortization, and the recording of the $1.9 million deferred gain during the 39-
weeks ended September 27, 2003 related to the June 29, 2001 sale of the
Company's Improvements business.  Net loss per common share was $0.17 for the
39- weeks ended September 27, 2003 and $0.11 for the 39- weeks ended September
28, 2002.  The per share amounts were calculated after deducting preferred
dividends and accretion of $7.9 million and $10.6 million for the 39- weeks
ended September 27, 2003 and September 28, 2002, respectively.  In addition, the
per share amounts were calculated after deducting additional preferred dividends
and accretion of $4.5 million incurred as interest expense after June 28, 2003. 
The weighted average number of shares of Common Stock outstanding used in both
the basic and diluted net loss per common share calculation was 138,315,800 for
the 39- weeks ended September 27, 2003 and 138,268,327 for the 39- weeks ended
September 28, 2002.

The Company reported a net loss of $16.6 million for the 13- weeks ended
September 27, 2003 compared with a net loss of $4.2 million for the comparable
period in the year 2002.    The $12.4 million increase in net loss is
attributable as explained above to the $11.3 million deferred Federal income tax
provision incurred to increase the valuation allowance and fully reserve the
remaining net deferred tax asset and the $4.5 million of increased interest
expense due to the implementation of FAS 150. These increases were partially
offset by the continued reductions in general and administrative expenses,
special charges and depreciation and amortization.    Net loss per common share
was $0.12 and $0.06 for the 13- weeks ended September 27, 2003 and September 28,
2002, respectively.  The weighted average number of shares of Common Stock
outstanding used in both the basic and diluted net loss per common share
calculation was 138,315,800 for both the 13- weeks ended September 27, 2003 and
September 28, 2002.

A conference call with the management of Hanover Direct, Inc to review the
Fiscal 2003 third quarter operating results will be held on November 10, 2003 at
3:00 p.m. Eastern Standard Time.  If you would like to participate in the call,
please call 877-691-0878 (Domestic) and 973-582-2741 (International) between
2:50 p.m. and 2:55 p.m. Eastern Standard Time.  The call will begin promptly at
3:00 p.m. Eastern Standard Time.  A re-play of the conference will be available
from 5:00 p.m. Eastern Standard Time on Monday, November 10, 2003 until 5:00
p.m. Eastern Standard Time on Tuesday, November 11, 2003 and can be accessed by
calling 877-519-4471 (Domestic) and 973-341-3080 (International) and entering
the Reservation No.: 4295209.

About Hanover Direct, Inc.

Hanover Direct, Inc. (AMEX:HNV) and its business units provide quality, branded
merchandise through a portfolio of catalogs and e-commerce platforms to
consumers, as well as a comprehensive range of Internet, e-commerce, and
fulfillment services to businesses. The Company's catalog and Internet portfolio
of home fashions, apparel and gift brands include Domestications, The Company
Store, Company Kids, Silhouettes, International Male, Scandia Down, and Gump's
By Mail. The Company owns Gump's, a retail store based in San Francisco. Each
brand can be accessed on the Internet individually by name. Keystone Internet
Services, LLC (http://www.keystoneinternet.com/), the Company's third party
fulfillment operation, also provides the logistical, IT and fulfillment needs of
the Company's catalogs and web sites.  Information on Hanover Direct, including
each of its subsidiaries, can be accessed on the Internet at
http://www.hanoverdirect.com/.

                  HANOVER DIRECT, INC. AND SUBSIDIARIES
                  CONDENSED CONSOLIDATED BALANCE SHEETS
             (In thousands of dollars, except share amounts)

                                             September 27,     December 28,
                                                2003              2002
                                              (Unaudited)

                         ASSETS

   CURRENT ASSETS:
      Cash and cash equivalents                  $931              $785
      Accounts receivable, net                 12,539            16,945
      Inventories                              53,000            53,131
      Prepaid catalog costs                    15,770            13,459
      Other current assets                      3,834             3,967
         Total Current Assets                  86,074            88,287

   PROPERTY AND EQUIPMENT, AT COST:
      Land                                      4,361             4,395
      Buildings and building improvements      18,210            18,205
      Leasehold improvements                    9,895             9,915
      Furniture, fixtures and equipment        56,240            56,094
      Construction in progress                    471                --

                                               89,177            88,609

      Accumulated depreciation and
       amortization                           (61,705)          (59,376)
        Property and equipment, net            27,472            29,233
   Goodwill, net                                9,278             9,278
   Deferred tax assets                          2,300            12,400
   Other assets                                   253               902
        Total Assets                         $125,377          $140,100


                  HANOVER DIRECT, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED BALANCE SHEETS (Continued)
             (In thousands of dollars, except share amounts)

                                             September 27,     December 28,
                                                  2003             2002
                                              (Unaudited)

     LIABILITIES AND SHAREHOLDERS' DEFICIENCY

   CURRENT LIABILITIES:
     Current portion of long-term debt and
      capital lease obligations               $  10,831        $   3,802
     Accounts payable                            40,522           42,873
     Accrued liabilities                         12,066           26,351
     Customer prepayments and credits             6,705            4,722
     Deferred tax liabilities                     2,300            1,100
              Total Current Liabilities          72,424           78,848
   NON-CURRENT LIABILITIES:
     Long-term debt                              22,820           21,327
     Series B Participating Preferred Stock,
      authorized, issued and
      outstanding 1,622,111 shares at
      September 27, 2003; liquidation
      preference of $112,964 at
      September 27, 2003                        104,437               --
     Other                                        7,748            6,387
            Total Non-current Liabilities       135,005           27,714
            Total Liabilities                   207,429          106,562
   SERIES B PARTICIPATING PREFERRED STOCK,
    authorized, issued and outstanding
    1,622,111 shares at December 28, 2002;
    liquidation preference was $92,379 at
    December 28, 2002                                --           92,379
   SHAREHOLDERS' DEFICIENCY:
     Common Stock, $.66 2/3 par value,
      authorized 300,000,000 shares;
      140,436,729 shares issued at
      September 27, 2003 and December 28, 2002   93,625           93,625
     Capital in excess of par value             325,923          337,507
     Accumulated deficit                       (498,254)        (486,627)
                                                (78,706)         (55,495)
   Less:
      Treasury stock, at cost
       (2,120,929 shares at
       September 27, 2003 and
       December 28, 2002)                        (2,996)          (2,996)
      Notes receivable from sale of Common Stock   (350)            (350)
              Total Shareholders' Deficiency    (82,052)         (58,841)
              Total Liabilities and
               Shareholders' Deficiency       $ 125,377        $ 140,100


                  HANOVER DIRECT, INC. AND SUBSIDIARIES
            CONDENSED CONSOLIDATED STATEMENTS OF INCOME (LOSS)
           (In thousands of dollars, except per share amounts)
                               (Unaudited)

                   For the 13- Weeks Ended      For the 39- Weeks Ended
                 September 27, September 28,  September 27, September 28,
                      2003          2002           2003          2002

   NET REVENUES    $  96,633     $ 106,030      $ 304,872     $ 329,393

   OPERATING COSTS
    AND EXPENSES:
     Cost of sales
      and operating
      expenses        62,557        68,890        194,361       210,379
     Special charges     193         1,463            681         1,696
     Selling expenses 22,787        25,355         74,099        76,554
     General and
      administrative
      expenses        10,092        11,834         30,857        36,806
     Depreciation and
      amortization     1,068         1,393          3,389         4,376
                      96,697       108,935        303,387       329,811

   (LOSS) INCOME FROM
    OPERATIONS           (64)       (2,905)         1,485          (418)
     Gain on sale of
      Improvements        --            --          1,911           318

   (LOSS) INCOME BEFORE
    INTEREST AND INCOME
     TAXES               (64)       (2,905)         3,396          (100)
     Interest expense,
      net              5,274         1,277          7,842         4,016

   LOSS BEFORE INCOME
    TAXES             (5,338)       (4,182)        (4,446)       (4,116)
     Provision for
      deferred federal
      income taxes    11,300            --         11,300            --
     Provision for
      state income taxes   7            30             17            90

   NET LOSS AND
    COMPREHENSIVE
    LOSS             (16,645)       (4,212)       (15,763)       (4,206)
     Preferred stock
      dividends and
      accretion           --         4,185          7,922        10,593

   NET LOSS APPLICABLE
    TO COMMON
    SHAREHOLDERS   $ (16,645)     $ (8,397)     $ (23,685)    $ (14,799)

   NET LOSS PER
    COMMON SHARE:
     Net loss per
      common share -
      basic and
      diluted         $ (.12)       $ (.06)        $ (.17)      $  (.11)
     Weighted average
      common shares
      outstanding -
      basic
      (thousands)    138,316       138,316        138,316       138,268
     Weighted average
      common shares
      outstanding -
      diluted
      (thousands)    138,316       138,316        138,316       138,268


                  HANOVER DIRECT, INC. AND SUBSIDIARIES
             CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                        (In thousands of dollars)
                               (Unaudited)

                                              For the 39- Weeks Ended
                                          September 27,       September 28,
                                                2003                2002
   CASH FLOWS FROM OPERATING ACTIVITIES:
   Net loss                               $   (15,763)        $    (4,206)
   Adjustments to reconcile net loss to
    net cash used by operating activities:
      Depreciation and amortization,
       including deferred fees                  4,206               5,483
      Compensation expense related to
       stock options                              473                 724
      Deferred tax asset                       11,300                  --
      Gain on the sale of Improvements         (1,911)               (318)
      Interest expense related to Series B
       Participating Preferred Stock
       redemption price increase                4,482                  --
      Other, net                                  367
   Changes in assets and liabilities:
      Accounts receivable                       4,125               3,863
      Inventories                                 131                 972
      Prepaid catalog costs                    (2,311)             (4,231)
      Accounts payable                         (2,351)               (860)
      Accrued liabilities                     (14,285)             (5,692)
      Customer prepayments and credits          1,983               2,255
      Other, net                                1,570              (2,078)
   Net cash used by operating activities       (7,984)             (4,088)
   CASH FLOWS FROM INVESTING ACTIVITIES:
      Acquisitions of property and equipment   (1,715)               (597)
      Proceeds from sale of Improvements        2,000                 318
      Other, net                                  (87)                 --
   Net cash provided (used) by investing
    activities                                    198                (279)
   CASH FLOWS FROM FINANCING ACTIVITIES:
      Net borrowings under Congress facility    8,530               4,562
      Other, net                                 (598)               (357)
   Net cash provided by financing activities    7,932               4,205
   Net increase (decrease) in cash and cash
    equivalents                                   146                (162)
   Cash and cash equivalents at the beginning
    of the year                                   785               1,121
   Cash and cash equivalents at the end
    of the period                           $     931           $     959

   Supplemental Disclosures of Cash Flow
    Information:
   Cash paid for:
      Interest                              $   2,480           $   2,451
      Income taxes                          $     665           $     193
   Non-cash investing and financing
    activities:
      Series B Participating Preferred
       Stock redemption price increase      $   7,575           $  10,593


DATASOURCE: Hanover Direct, Inc.



CONTACT:  Charles E. Blue, Senior Vice President of Hanover Direct, Inc.,

[phone]; or Rich Tauberman of The MWW Group, [phone], for

Hanover Direct, Inc.



Web site:  http://www.hanoverdirect.com/

http://www.keystoneinternet.com/ 

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