Bob Higgins – Chairman & CEO John Sullivan – CFO Edmond Thomas – Board of Directors

Brandon McMillan – Centurion Investment William Myers – Miller Asset Management

Good day ladies and gentlemen, and welcome to the Trans World Entertainment third quarter 2010 conference call. At this time, all lines are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator instructions) as a reminder, this conference is being recorded. I would now like to turn the conference over to your host for today, Mr. Bob Higgins, Chairman and CEO. Please begin sir.

Thank you, Sean. Good morning everyone. On the call with me today are Mike Honeyman, our President and Chief Operating Officer; and John Sullivan, our Chief Financial Officer. Thank you for joining us today as we discuss our third quarter results, we will take questions following our comments. Although sales were softer than expected, we managed them improve our financial performance from last year through management of gross margin and expenses. Comp store sales decreased 5%. Total sales in the quarter decreased 20% to $129 million. Our net loss for the third quarter was $16.1 million or $0.51 per share compared to $22.3 million last year or $0.71 per share. Overall the video industry was down 11% our video sales increased 2% on a comp store basis in the third quarter. We managed to increase sales in this category with our broad assortment of titles. Video now represents 44% of our business, up from 41% last year. For the quarter our comp sales in music were down 7% compared to CD sales for the industry that declined 24%. Music represents 36% of our business as compared to 37% last year. Comp store sales for electronics accessory and trend increased 5% on a combined basis and represented 15% of our business versus 13% last year. Comp store sales in our game category decreased 41% and represented 5% of our business as compared to 8% last year. During fiscal 2009, the company eliminated the game category in over 200 stores; at the end of the third quarter 135 of our stores carry games compared to 347 a year ago. John will now take you through the financial results for the third quarter. John.

Thank you Bob, good morning. Our net loss for the quarter improved $6.2 million to $16.1 million from last year’s net loss of $22.3 million. The loss per share was $0.51 compared to $0.71 per share last year. Our gross margin rate for the quarter increased to 34.1% from 33.9% last year, a 20 basis point improvement. SG&A expenses were $56.2 million, a reduction of 22% versus a sales decline of 20%. As a percentage of sales, SG&A expenses were 43.7% this year versus 44.8% last year, an improvement of a 110 basis points. EBITDA was a loss of $12.3 million in the quarter versus $17.6 million last year, an improvement of $5.3 million. Net interest expense was $900,000 in the quarter versus $700,000 last year. At the end of the quarter, borrowings on our line of credit were $8.6 million which was $46.9 million less than last year's $55.5 million. We accomplish this through the management of working capital. Year-over-year, we lowered our inventory by $98 million. At quarter-end inventory position was $271 million versus last year's $369 million. On a square foot basis, this was $76 a foot versus $83 last year. We continue to focus on managing our working capital needs in relation to the business trends and continue to maintain a strong financial position. During the quarter, we closed one store and we ended the quarter with 533 stores in operation and square feet totaling 3.6 million versus last year's 690 stores and square feet totaling 4.5 million. I will now turn it back to Bob to complete our comments.

Thank you John. We are well positioned for the all important holiday season. The line-up of new releases in music is stronger this year than last and we expect Blue Ray sales to drive the video category. We have created a stronger value statement to drive additional traffic across the lease line and improve conversion rates. Our associates continue to offer best-of-class customer service to compliment the broadest selection of music and video product available in any national retail chain. In this challenging time we’re effectively managing our working capital as evidenced by our inventory position at the end of the third quarter, and our lower borrowings under our credit facility. We’re also keeping our capital expenditures below $5 million for the year. Despite the sales decline during the third quarter, we’re able to reduce our EBITA loss versus last year, to improve gross margin and control of expenses and our balance sheet remains strong. I would like to thank our associates for their commitment to the company and our vendors for their continued support. We look forward to maximizing our financial results in the fourth quarter and I would now like to open up the call for questions.

Thank you ladies and -

Yes if you could open up the call I would appreciate it.

Thank you, ladies and gentlemen (Operator instructions) one moment please. Our first question comes from Brandon McMillan with Centurion Investment. Brandon McMillan – Centurion Investment: Hey, your – I don’t look first of all – a good job managing the business in a very challenging period. Bob, I had a question I know, you know you have obviously shown a lot of belief and support in the business here and continuing to buy shares etc. But I guess you have done an amazing job here in a very challenging – circumstances. Could you just talk about sort of your thoughts around strategy and I think what most people would say it’s not necessarily correct but what most people would say is that sort of a melting ice cube of a business with writing on the wall around downloads even potentially highly eroding the video category that you have managed to construct for yourself let alone what’s going on the music side. Just wanted to ask you about what your thoughts are and how you plan to go forward here.

I think that is a good question and you are right the way most people think about our business today and I’ll tell you our strategy is – and is to be the last man standing in the business and that can be good and bad. And we still think it’s very good and things are working at the way we had thought they would and the major competitors today whether be Best Buy, Target or Walmart have all significantly downsized their music and DVD departments especially those two particular areas and they haven’t done that in Blue Ray because they consider that a growth category, but they done it in the other categories. So we feel this gives us a great opportunity with the selection that we have to continue to grab market share and to grab more physical business. The other thing that is very important now, we have to have the value, the right value for the consumer. We have proven that when we have the right value of for the consumer, the do buy the physical product. This quarter was disappointing to us from sales point of view because we had a number of new releases that was supposed to come out – fell out or fell into the fourth quarter and in general it is just not a good quarter for us from sales point of view. But we feel very confident in the fourth quarter and other thing, strategically we are doing, we are addressing all of our expense structure as an example which we have already announced, we are losing our Carson facility because with a smaller store base, we will do all distribution out of Albany New York and that is down to a skeleton crew now less than about 10 people working there and just distributing some products for this fourth quarter and will close in December. So but, we are looking at every single expense line and getting expenses in line with the size of the business and we are examining everything so from a sales point of view, we feel that we can get the sales driving in the physical categories due to the fact that the change in the competitive environment. Brandon McMillan – Centurion Investment: Okay, so thanks for that – so you basically, I mean it seems to be the case that people will still be buying videos for the next few years even if the erosion happens as the pessimists suggest it will. So when you talk about being the last man standing in the business you just – do you think that there will be returns that accrete from – I mean obviously you will get a higher percentage of the market share but do you think that there will be some sort of potential change in the business model that will be possible as you are one of the last people in the business still or how do you think about that?

One of the changes in the business model will be, which we have already accomplished this and continue to accomplish this as leases expire is our occupancy. Definitely I think the landlords do understand that we are in a difficult business and can live with the occupancies we did five years ago. And we have the many, many leases; I think it’s about 360 leases expiring this year which gives us the ability. Some of those are already on a favorable rent deal some of them, we have to either address or close some stores and we will do that this year because we think that’s a good part – that’s a very important part of our strategy also as right-sizing the company. Brandon McMillan – Centurion Investment: Okay great and Bob how do you think about that when you are thinking about the store closing equation. Can you talk a little bit more about that in terms of – does the store have to be profitable on a standalone basis and then on what kind of metrics and over what time period and what – if you are renewing leases are they just very sort of from month-to-month or year-to-year. How do you think how do you plan on doing that too?

Yes, we – number one I’ll answer your last question first. But we don’t renew anything that will be less than a year and they have to be – we have to get them to a point that they give us a reasonable return of profitability on a four wall basis, we will not renew the lease. And we have been very successful with that because of the cooperation with the landlord and them understanding our situation. Brandon McMillan – Centurion Investment: Okay, right.

Any industry situation. They feel we operate a good business and if some one is going to come out of this business with a successful format which they would like to see in their centers, it will be us. Brandon McMillan – Centurion Investment: Okay I mean Bob can you talk I mean – in your opinion is there – and then I’ll get back in queue – but is there – do you believe that the business will be viable selling DVDs or Blue Ray or music four or five years form now. How do you think about that?

In this business four or five years from now believe it or not that’s a tough question to answer and I will just be giving you a bullish answer if I answered it but I think we will have to go through some product line changes as we go through this and see where the industry goes because see as downloading is becoming more of an issue in DVD as we go along. We will just see what our volume is in DVD and whether we are in digital download business also. So we have just got to take it a year or two at a time. Well my plan is to definitely drive a successful business in 2011. Brandon McMillan – Centurion Investment: Okay great thanks very much.

Thank you.

(Operator instructions) our next question comes from William Myer with Miller Asset Management. William Myer – Miller Asset Management: Hi, thanks for taking my question. First the – you had a sequential decline. Would you characterize that as seasonal, you only closed one store in the quarter. Is that typical seasonality or is that something else?

Yes, the closing of one store in a quarter is very seasonality and normally happens because if we – first of all we don’t have many leases that expire in that quarter but if we did and it was an unfavorable store, chances are we would get at least a concession to continue that store until the end of January and so that’s why there isn’t many – most of the closings occur for us in the fourth quarter but we have closed how many stores this year Tom?

29.

We closed 29 stores over the course of the year. William Myers – Miller Asset Management: Okay, and are your website revenues material at this point. How do you see your website?

They are material at this time, but we’re looking at that very carefully to see if we can start, after in 2011 make it a much better contributor for us. William Myers – Miller Asset Management: Okay, thank you very much.

Thank you.

Again ladies and gentlemen, if you have a question (Operator instructions). I am not showing any other questions at this time.

Okay, well I would just like to say to everyone that we look forward talking with them after the holidays and I would like to wish everybody a very happy holiday season and hope you have a enjoyable shopping experience in our stores. So, thank you very much Sean. Thank you for your time. Good day.

Thank you ladies and gentlemen and thank you for the participants in today’s conference. This does conclude the conference, you may now disconnect. Good day.