WEEHAWKEN, NJ, MARCH 9, 1999 -- Hanover Direct, Inc. (AMEX: HNV) today announced its results for the fourth quarter and twelve months ended December 26, 1998.

For the fourth quarter of 1998, Hanover Direct reported revenues of $163.6 million compared to $171.6 million for the same period last year, a decrease of $8.0 million or 4.7%. The net loss for the fourth quarter was $(13.4) million, or $(.06) per common share, compared to a net profit of $4.8 million, or $.02 per common share, for the prior year period. The per share amounts were calculated based on weighted average shares of 210,351,824 and 202,891,117 for the current year and prior year periods, respectively.

Earnings before interest, taxes, depreciation and amortization ("EBITDA") decreased to $(8.4) million for the fourth quarter and $(7.3) million for the year. However, prior to variable contribution losses for Austad's, Tweeds and Colonial Garden Kitchens, which are being repositioned as primarily e-commerce brands, and certain other non-cash charges and credits, proforma EBITDA cash flow was breakeven for the quarter and $4.9 million for the year. If repositioning efforts undertaken by Austad's, Tweeds and Colonial Garden Kitchens are unsuccessful, these brands will be sold or shut down.

The promotional fourth quarter pricing environment resulted in a margin reduction as the Company responded to softening business conditions with more aggressive pricing for certain of its product inventories. In addition, the Company recorded one-time charges in the fourth quarter of $8.1 million while also spending approximately $2.5 million toward investments related to e-commerce initiatives. Revenues for Austad's, Tweeds and Colonial Garden Kitchens declined $5.5 million during the quarter and their variable contribution losses for the quarter were $6.7 million, which included onetime charges for a $3.7 million writedown of discontinued catalog inventory and $2.2 million of additional expenses associated with the plans to reposition these brands. For the year, revenues for these three brands declined $18.0 million and variable contribution losses totaled $8.9 million.

President and Chief Executive Officer Rakesh K. Kaul stated, "Although the fourth quarter did not meet our expectations, we have seen continued business growth and profits within our core catalog brands including The Company Store, Silhouettes and Improvements. This growth was achieved in spite of a general softening in the catalog retail environment in the October through November period. Company-wide sales during December exceeded forecasted expectations. In addition, year-end backorders were at a record low for the Company, and telemarketing and fulfillment costs continued to improve. Despite the slow down in sales, inventories were reduced approximately $15 million during the quarter, resulting in a year-end level that approximated the prior year. By exiting those catalogs with unsatisfactory sales and profit performance, we will be able to focus our management and capital resources on new initiatives."

Kaul added, "On a positive note, our e-commerce business grew tremendously last year. Consumer demand directly attributed to each of our company's Internet web sites soared to $8.3 million for the entire year, a 10-fold increase versus 1997. About half of this volume was generated during the fourth quarter, which is to be expected. However, January activity indicates that consumers have embraced shopping our catalogs on-line, since demand reflecting on-line transactions continues to accelerate."

" Each of the Internet initiatives instituted during 1998 has been well received by consumers. Our alliance with Excite, bringing merchandise from each of our catalogs to Excite's online audience of 17 million shoppers, has more than met our expectations, reconfirming our belief that Internet portals represent tremendous opportunities for us. Our partnership with ArtSelect has not only generated positive sales results but also validated our ability to drive customers to a web site through advertising in the 240 plus million catalogs we mail each year. We are continuing to develop additional alliances that fit our strategy to become an industry leader in electronic commerce."

"A major component of this strategy is to also carve out a leadership position in the high-growth market niche of providing comprehensive services for those wanting to do business on the Internet. Our state-of-the-art computer system can provide a broad range of services required by e-commerce companies including telemarketing, order processing and credit card transactions. Our Keystone Fulfillment subsidiary, which provides the back-end support, is also off to a strong start. On-going investments in both of these areas help us set the industry standard and maintain our leadership position in what is perhaps the key area to e-commerce success."

Total revenue for the twelve months ended December 26, 1998 was $546.1 million compared with $557.6 million for the twelve months ended December 27, 1997. Excluding Austad's, Tweeds and Colonial Garden Kitchens, as discussed earlier, revenues from continuing operations increased $15.4 million or 3.1 %. The net loss for the twelve months ended December 26, 1998 was $(26.2) million, or $(.13) per common share, compared to a net loss of $(11.1) million, or $(.06) per common share, for the same period last year. The per share amounts were calculated based on weighted average shares of 206,508,110 and 176,621,080 for the current year and prior year periods, respectively. The increase in weighted average shares was primarily due to a $50 million rights offering completed in June 1997.

Revolver debt decreased $20.0 million to $-0- during the quarter. Remaining availability including cash on hand under the Company's revolving credit agreement was approximately $49 million at December 26, 1998. In addition, Richemont, the Company's largest shareholder, agreed to extend its $25.8 million letter of credit facility for one year to March 30, 2000.

Hanover Direct, Inc. (AMEX: HNV) is a leading, specialty direct marketer with a diverse branded portfolio of home fashions, general merchandise, women's and men's apparel and gift catalogs and proprietary products delivered via direct mail and electronic commerce platforms. Its branded portfolio of catalogs includes: Domestications and Colonial Garden Kitchens (Home Fashions Ð Mid Market brands); The Company Store and Kitchen & Home (Home Fashions Ð Upscale brands); Improvements and The Safety Zone (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 owns Gump's, a retail store based in San Francisco and recently launched Keystone Fulfillment Inc., offering third party fulfillment and proprietary electronic commerce services. Information on all of Hanover Direct's retail titles can be accessed on the Internet individually by name.

Cautionary Statements

This release contains the following forward looking statements:

1. By exiting those catalogs with unsatisfactory sales and profit performance, we will be able to focus our management and capital resources on new initiatives.
2. Our alliance with Excite, bringing merchandise from each of our catalogs to Excite's online audience of 17 million shoppers, has more than met our expectations, reconfirming our belief that Internet portals represent tremendous opportunities for us.
3. We are continuing to develop additional alliances that fit our strategy to become an industry leader in electronic commerce.
4. A major component of this strategy is also to carve out a leadership position in the high- growth market niche of providing comprehensive services for those wanting to do business on the Internet. The following are important factors that could cause actual results to differ materially from those contained in the forward looking statements:
   A general deterioration of economic conditions in the United States leading to increased competitive activity including a business failure of a substantial size company in the retail industry, a reduction in consumer spending generally, or specifically with reference to the types of merchandise the Company offers in its catalogs. The failure of the Internet generally to achieve the projections made for it with respect to growth of e-commerce or otherwise.

   The ability of the Company's computer systems to connect with the systems of others and to be able to serve the other's fulfillment needs.

   The Company has a history of operating loses. Continuation of the operating losses may prevent the Company from making the investments in e-commerce which are required to be made to achieve a position of leadership in serving the e-commerce needs of companies doing business or desiring to do business on the Internet.

   The ability of the Company to attract management with the requisite experience in e-commerce or in Internet businesses and to develop a culture which is consistent with the manner in which e-commerce is managed.

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

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