WEEHAWKEN, NJ, August 6, 1997 -- Hanover Direct, Inc. (AMEX: HNV) today reported financial results for the second quarter and six months ended June 28, 1997.

For the second quarter ended June 28, 1997, Hanover Direct reported revenues of $133.8 million, compared to revenues of $180.2 million for the second quarter of 1996. Revenues from continuing catalogs decreased 13% to $132.4 million from $152.1 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 ($1.2 million) compared to ($6.4 million) for the 1996 second quarter. The net loss for the 1997 second quarter was ($5.6 million), or ($0.04) per common share, compared to a net loss of ($12.5 million), or ($0.13) per common share, in the second quarter of 1996. The 1997 second quarter results are based on 158,741,451 weighted average shares outstanding, compared to 93,576,472 weighted average shares outstanding in the prior year period, due to a $50 million shareholder rights offering completed in June 1997.

For the six months ended June 28, 1997, Hanover Direct reported revenues of $263.5 million, compared to revenues of $345.7 million for the six months ended June 29, 1996. Revenues from continuing catalogs decreased 10.1% to $255.0 million from $283.7 million for the year-ago period, also reflecting the impact of the new business formula. EBITDA for the six months ended June 28, 1997, was ($3.4 million) compared to ($11.1 million) for the first half of 1996. The net loss for the 1997 first half was ($12.3 million), or ($0.08) per common share, compared to a net loss of ($22.0 million), or ($0.24) per common share, in the first half of 1996. The first half 1997 results are based on 151,656,168 weighted average shares outstanding, compared to 93,535,204 weighted average shares outstanding in the prior year period, due to a $50 million shareholder rights offering completed in June 1997.

President and Chief Executive Officer Rakesh K. Kaul stated, "We are pleased to report improvement in our operating performance versus last year and the first quarter of this year Ð largely resulting from our new operating plan and business formula. In line with our cost reduction efforts, cost of sales and operating expenses for the second quarter are down to 64.7% of sales versus 66.8% for the prior year period, while selling expenses have been reduced to 25.9% of sales versus 28.9% for the 1996 second quarter, largely due to our targeted mailing efforts. These expense reductions resulted in significant improvement in operating cash flow at the EBITDA level. In addition, during the second quarter, Hanover Direct successfully completed its $50 million shareholder rights offering, which resulted in the Company's revolving debt being completely repaid and left the Company in a positive net cash investment position. This funding has enabled us to improve vendor payments and reduce outstanding payables."

Mr. Kaul further stated, "The Company Store continued its strong performance, registering record sales and earnings for the quarter and six month period. Domestications significantly improved its operating margins for the quarter and six months, and focused on servicing its core customer base. In the general merchandise group, sales were negatively affected by unseasonably cool weather, while in the women's apparel group, Tweeds suffered from poor customer response and margin deterioration due to clearance activities. Gump's By Mail and the Gump's retail store performed in line with our expectations. Going forward, the Company has several initiatives underway aimed at further reducing general, administrative and operating costs, including the consolidation of fulfillment operations under one roof at our Home Fashions Distribution Center and exiting from surplus facilities."

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 strategic business unit 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.

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

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