WEEHAWKEN, NJ, November 05, 1997 -- Hanover Direct, Inc. (AMEX: HNV) today reported financial results for the third quarter and nine months ended September 27, 1997.

For the third quarter ended September 27, 1997, Hanover Direct reported revenues of $122.6 million, compared to revenues of $156.7 million for the third quarter of 1996. Revenues from continuing catalogs decreased 10.4% to $121.9 million from $136.1 million for the year-ago quarter, reflecting the Company's new business formula of focusing on more profitable products and repeat customers.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the quarter were $.5 million compared to ($22.8 million) for the 1996 third quarter. The net loss for the 1997 third quarter was ($3.4 million), or ($0.02) per common share, compared to a net loss of ($29.6 million), or ($0.26) per common share, in the third quarter of 1996.

For the nine months ended September 27, 1997, Hanover Direct reported revenues of $386.1 million, compared to revenues of $502.5 million for the nine months ended September 28, 1996. Revenues from continuing catalogs decreased 10.2 % to $376.9 million from $419.8 million for the year-ago period, also reflecting the impact of the new business formula. EBITDA for the nine months ended September 27, 1997 was ($2.9 million) compared to ($33.9 million) for the first nine months of 1996. The net loss for the first nine months of 1997 was ($15.7 million), or ($0.09) per common share, compared to a net loss of ($51.6 million), or ($0.52) per common share, in the first nine months of 1996.

President and Chief Executive Officer Rakesh K. Kaul stated, "We are extremely pleased to report positive EBITDA cash flow for the third quarter and improvement over the 1996 third quarter EBITDA. These results demonstrate, for the third quarter in a row, the increasing success of our cost reduction strategies, as well as our new operating plan and business formula, and are particularly notable in light of the UPS strike, which negatively impacted consumer demand of Hanover's merchandise during the duration of the strike."

"We are on track with the planned consolidation of our fulfillment operations under one roof at our Home Fashions Distribution Center in Roanoke, VA, with our entire apparel business completing the move during the third quarter, and the balance of the consolidation scheduled to be completed in the first quarter of 1998," Mr. Kaul continued. "As we progress in the fourth quarter, which typically produces higher revenues, we are confident that we will continue to realize improved financial results for the quarter and we look forward to a successful 1998."

Mr. Kaul added, "With regard to the individual brands, The Company Store continued to register very strong performance and is a business that has consistently shown tremendous growth. We are particularly pleased by the improvements seen at our Domestications, Men's Apparel, Gump's By Mail and Gump's San Francisco businesses this quarter versus the same period last year. Tweeds continued to suffer from poor customer response, while the General Merchandise group had flat performance versus last year. Going forward we will continue with our repositioning initiatives to unlock the earnings power that we believe exists in our catalog brands."

The Company also announced that one of its principal shareholders, Richemont Finance S.A., agreed in principal to extend its guarantee to March 30, 1999, of Hanover obligations to Swiss Bank under the approximate $27 million of letters of credit issued to Hanover by the Bank. The extension is subject to approval of Congress Financial Corporation and Swiss Bank, as well as certain other conditions. As of October 1, 1997, Hanover Direct has paid down $1 million of underlying debt, reducing the Swiss Bank letters of credit to approximately $27 million. In addition, Congress Financial Corporation agreed to extend the Term Promissory Notes, aggregating approximately $8 million, to November 1998. The Company will continue to make principal payments of $83,333 each month, with the remaining $7 million due on November 1, 1998.

Mr. Kaul stated, "We are appreciative of Richemont's financial commitment to Hanover's turnaround plan which continues to register strong improvements in operating performance, and signifies Richemont's support of the direction in which the Company is now proceeding. The extension of the letter of credit facility will enable the Company to build on the improvement made to date in fill rates and inventory receipts. Our vendors are responding positively to Hanover's strengthened balance sheet, which includes net availability of more than $27 million and revolver debt of less than $1 million at the end of the third quarter."

In addition, the Company announced that SMALLCAP World Fund, Inc. has agreed to purchase 3.7 million shares of its common stock at $1.41 per share. SMALLCAP World Fund, a mutual fund and substantial investor in Hanover Direct, is advised by California-based Capital Research and Management. This investment increases the fund's holdings to approximately 10 million shares of the Company's common stock.

The 1997 third quarter results are based on 200,329,521 weighted average shares outstanding, compared to 114,251,875 weighted average shares outstanding in the prior year period, due to a $50 million shareholder rights offering completed in June 1997. The results for the first nine months of 1997 are based on 167,906,290 weighted average shares outstanding, compared to 100,365,678 weighted average shares outstanding in the prior year period, due to the shareholder rights offering in June 1997.

Hanover Direct, Inc. is a leading direct specialty retailer that markets, via a portfolio of branded specialty catalogs, home fashions, general merchandise, men's and women's apparel and gifts. The Home Fashions - Mid Market business includes Domestications, a leading specialty home textiles catalog. The Home Fashions - Upscale group includes The Company Store, a direct marketer of down comforters and other down and related products for the home, and Kitchen & Home, an upscale kitchen and home products catalog. The general merchandise group includes Improvements, a do-it-yourself home improvements catalog, The Safety Zone, a direct marketer of safety, prevention and protection products, and Colonial Garden Kitchens, featuring work saving and lifestyle enhancing items for the kitchen and home. The Women's Apparel group includes Silhouettes, featuring everyday, workout, special occasion and career fashions for larger sized women, and Tweeds, the European-inspired women's fashion catalog.

The Men's Apparel group includes International Male, offering unique men's fashions with an international flair, Austad's, a direct marketer of golf equipment, apparel and accessories, and Undergear, a leader in activewear, workout wear and fashion underwear for men. The Gifts group includes Gump's By Mail, a leading upscale catalog of luxury gifts, and Gump's, a retail store based in San Francisco.

Cautionary Statements:

In accordance with the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995, we have identified the following forward-looking statements contained herein:

The following are important factors, among others, that could cause the Company's actual results to differ materially from those expressed in any forward-looking statements made by, or on behalf, of the Company:

A general deterioration in the economic conditions in the United States leading to increased competitive activity including a business failure of a substantial size company in the retail industry; and a reduction in consumer spending generally or specifically with reference to the types of merchandise that the Company offers in its catalogs;
an increase in the failure rate of consumer indebtedness generally; and an increase in credit sales by the Company accompanies by an increase in its bad debt experience with respect to consumer debt;
a delay in the implementation of the actions to be taken by the Company to increase the efficiency of its operations' rapid increases and decreases in the volume of merchandise that passes through the Company's warehouse facilities;
an increase in paper or postage costs;
selection of merchandise which fails to meet customer demand;
unanticipated increase in operating costs; and
purchases of inventory beyond actual needs.

CONTACT:
AGG International, Public Relations
Paula Zwerdling
Managing Director
(212) 869-8230

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