Weehawken, N.J., March 9, 1998 -- Hanover Direct, Inc. (Amex: HNV) today announced its financial results for the fourth quarter and twelve months ended December 27, 1997.

President and Chief Executive Officer Rakesh K. Kaul stated, "We are extremely pleased to report Hanover Direct's first profitable quarter since 1994. This is a direct result of the new business formula the Company implemented in the beginning of 1997, including cost reductions, customer segmentation, targeted mailings, and customer retention. The year ended with an improved inventory position, while backorders dropped significantly during December."

Mr. Kaul added, "We ended the year with positive EBITDA cash flow of over $7 million for the fourth quarter before a special non-cash credit. Our balance sheet is strong, with the Company in a positive cash position of approximately $15 million and no revolver debt at year-end 1997. As a result of our improved financial position, our lenders have agreed in principle to increase Hanover Direct's borrowing capacity under its revolving loan arrangement and to extend the credit agreement, on more favorable terms, to January 31, 2001."

"One of our primary strategic objectives has been to stabilize our financial position and, in the process, begin building market leadership brands within our portfolio," stated Kaul. "The foremost leadership brand in our portfolio, The Company Store, has achieved strong market growth with its vertically integrated product, personalized focus and lifestyle orientation. We are also pleased with the improved results the Domestications management team has achieved. Internet initiatives have also produced encouraging results and all Hanover Direct catalogs are now up and running on-line. Telephone upsell and loyalty membership programs have shown strong growth."

For the fourth quarter of 1997, Hanover Direct reported revenues of $171.6 million, a decrease of $26.3 million from the comparable period a year earlier, primarily due to discontinued catalogs. Revenues from continuing catalogs decreased from $177.7 million in the fourth quarter of 1996 to $171.4 million in the fourth quarter of 1997. Net income for the 1997 fourth quarter was $4.8 million, or $.02 per common share, compared to a net loss of ($53.5) million, or ($0.37) per common share, in the fourth quarter of 1996, which included special charges of $36.4 million. The 1997 net income includes a reversal of $2.2 million of the 1996 special charge which primarily relates to the Company's decision to remain in its Weehawken corporate facility.

For the full year 1997, Hanover Direct reported revenues of $557.6 million, compared to revenues of $700.3 million for the full year 1996. Revenues from continuing catalogs decreased $48.9 million to $548.6 million for the full year 1997 from $597.5 million for the prior year, reflecting the Company's new business formula. The net loss for 1997 was ($10.9) million, or ($.06) per common share, compared to a net loss before an extraordinary item of ($103.9) million, or ($0.93) per common share, for 1996. The 1996 extraordinary item of ($1.1) million, or ($0.01) per common share, related to early extinguishment of debt. After giving effect to the extraordinary item, the net loss for 1996 was ($105.0) million, or ($0.94) per common share. The results for the fourth quarter and full year 1997 are based on 202,891,117 and 176,647,453 weighted average shares outstanding, respectively, compared to 144,667,953 and 111,441,247 weighted average shares outstanding in the comparable 1996 periods.

In 1998, the Company will focus on the following strategic business initiatives:

• First, improving its vendor supply management to improve gross margins, fill rates and customer satisfaction. The Company's new arrangements with its lenders will assist it in achieving this objective.
• Second, supporting long term brand growth in revenues and customer file size by making the necessary investments to increase catalog circulation, upgrade systems and strengthen management.
• Third, leveraging its customer database through consumer promotions including credit marketing and membership services. As previously announced, Mr. Richard Hoffmann recently joined the Company as Senior Vice President, Chief Marketing Officer, to focus on these initiatives.
• Fourth, developing third party fulfillment service capabilities. As previously announced, Mr. Michael Lutz was appointed Chief Operating Officer of the Company and will devote a significant portion of his time to developing a third party fulfillment program for Hanover Direct. Recently, the Company secured an important third party customer.
• Fifth, leveraging its information platform and brand names through the emerging digital distribution channels.
• Sixth, continuing focus on cost reduction through productivity and run rate improvements.

Mr. Kaul concluded, "Although seasonality may well produce losses during certain portions of the upcoming year, the performance of the Company in its 1997 fourth quarter augurs well for the full year of 1998."

Hanover Direct, Inc. (AMEX: HNV) is a leading, specialty direct marketer with a diverse branded catalog portfolio of home fashions, general merchandise, women's and men's apparel and gifts, including proprietary products, delivered via direct mail and electronic commerce. Its branded portfolio of catalogs includes: Domestications (Home Fashions - Mid Market brands); The Company Store and Kitchen & Home (Home Fashions - Upscale brands); Improvements, The Safety Zone and Colonial Garden Kitchens (General Merchandise brands); Silhouettes and Tweeds (Women's Apparel brands); International Male, Austad's and Undergear (Men's Apparel brands); and Gump's By Mail (Gift brands). The Company also owns Gump's, a retail store based in San Francisco.

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

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