Bob Higgins – Chairman and CEO Mike Honeyman – President and COO John Sullivan – CFO

Brandon McMillan – Centurion Investment

Good day, ladies and gentlemen. Welcome to the Trans World Entertainment First Quarter 2011 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. (Operator Instructions) As a reminder, this conference call is being recorded. I would like to introduce your host for today’s call, Mr. Bob Higgins, Chairman and CEO. Sir, you may begin.

Thank you, Duranda [ph]. Good morning. On the call with me today is Mike Honeyman, our President and Chief Operating Officer; and John Sullivan, our Chief Financial Officer. Thank you for joining us as we discuss our first quarter results. We’ll take questions following our comments. During the quarter, we achieved positive EBITDA, which marked our best first quarter EBITDA performance since 2005. During the fourth quarter of last year, which is our highest volume sales quarter, we improved EBITDA year-over-year by $11 million. I’m pleased to report that we followed that performance by improving this year’s EBITDA by $7.8 million to be a positive EBITDA of $36,000, compared to an EBITDA loss of $7.8 million last year. Total sales in the first quarter decreased 16% to $131.5 million as we operated 18% fewer stores. Comp store sales decreased 2% compared to last year. Now, let me touch on our performance by category. Video comp sales decreased by 5%, comp sales in our top 50 skews decreased 39% during the quarter due to the strength of new releases last year, which included Avatar and New Moon. Our comp sales excluding top 50 increased 3%, demonstrating the underlying strength of our core catalog business. Video represented 42% of our business, down from 45% last year for the quarter on an industry-wide basis video sales were down 20%. Music comp sales declined 3%, comp sales in our top 50 skews decreased 13% during the quarter, similar to our comp sales in video, our comp sales excluding the top 50 increased 3%, demonstrating the underlying strength of our core catalog business. The music category represented 37% of our business for the quarter, compared to 36% last year. For the quarter on an industry-wide basis, excuse me, physical CD sales were down 6%. Electronics comp store sales increased 15%. Electronics sales represent 9% of our total business, compared to 7% last year. Trend comparable store sales increased 80%. Trend product represented 7% of our business in the quarter, up from 6% last year. Video games comp store sales were down 10% for the quarter. Last year at this time, we were still liquidating games in stores that our games removed from their assortment. We now have games at 121 stores, which represent 27% of our chain. Comp sales in the 121 go-forward stores were flat to last year in the game category. Game sales represent 5% of our business as compared to 6% last year. John will now take you through the financial highlights for the quarter. John?

Thank you, Bob. Good morning. Our net loss for the quarter was $2.5 million or $0.08 per share, a 78% improvement over last year’s net loss of $11.4 million or $0.36 per share. As Bob mentioned, EBITDA was a positive $36,000 in the quarter versus an EBITDA loss of $7.8 million last year, which is the best first quarter performance an EBITDA since 2005. Our gross margin rates for the quarter increased 380 basis points to 36.7% of sales from 32.9% last year. The increase in gross profit as a percentage of sales was due to higher margin rates across all of our product categories. And the leveraging of our distribution of freight costs due to the closing of a distribution facility in Carson, California last year. SG&A expenses were $48.3 million, a reduction of 18.6% and a total sales decline of 16%, resulting in a decrease as a percentage of sales to 36.7% this year from 37.9% last year. The decrease in SG&A was driven by the closing of underperforming stores and continued focus on a factor of expense management. Net interest expense was $832,000 in the quarter versus $688,000 last year. The increase was primarily due to the amortization of commitment fees, related to the three year extension we signed in April of 2010. In addition, interest expense also increased due to a 55 basis point increase in our unused loan commitment fee. The company did not require any borrowings under its line of credit during this year's first quarter and we ended the quarter without any borrowings outstanding under the line of credit and a cash balance of $29.7 million compared to $21.3 million last year. Year-over-year, we have lowered our inventory by $35 million our quarter end inventory position was $218 million versus last year's $251 million. Our first square foot basis was a $74 a foot versus $69 a foot last year. During the quarter, we closed 17 stores and opened one new store. We ended the quarter with 444 stores and 3 million square feet in operation versus last years 544 stores and 3.6 million square feet. Now I will turn it back over to Bob.

Thank you. John. We are encouraged by our first quarter results. We posted our best first quarter performance since 2005. We improved our net loss over last year by $8.9 million. As mentioned earlier, this was the most profitable fourth quarter in 40 years. As we discussed in our year-end call, 2011 is a year for us to improve our performance on a per store basis through capitalizing on a foundation we have built to deliver better value to our customers, control expenses and drive additional bottom-line contributions. At that time, we committed to aggressively seizing opportunities to improve our operating results, evaluating all aspects of our business by challenging each and every component – excuse me – of our business to improve and become more efficient. While at the same time we are committed to investing in people, technology and merchandise to support our future. While working to improve our results, we continue to focus on a management of inventory and cash to provide the needed capital as we work through our transition. We made progress on achieving the initiatives – these initiatives in the first quarter. The 2% comp decrease was encouraging because of the tough comparisons from last years first quarter. We were able to partially offset a decline in our largest category video, which was up against two blockbuster releases with comp increases in our video and music core catalog coupled with strong comp increases in both electronics and trend. Combined electronics and trend now represent 16% of our business as compared to 13% last year. Our gross margin as a percentage of sales improved significantly over last year as we improved our margin rates across all categories. We continue to streamline operations and improve processes and reduce expenses as demonstrated by the continued leveraging of our SG&A expenses during the first quarter. We have made significant progress in the first quarter, but we still have a lot to accomplish this year. We are moving in the right direction and look forward to the remainder of 2011. Now, Durand, I would like to open up the call for any questions.

(Operator Instructions) First question is from the Brandon McMillan. Your line is open. Brandon McMillan – Centurion Investment: Yes. Hi. Bob, I guess a couple of things. First of all, you all insist that the comp – the categories pretty quickly – I will go back and listen to that later, but could you just – other than the electronics and trend improvement as a percentage, how are you all able to keep comps at just down at 2%? Was that the primary offset to the video decrease year-over-year or what really drove the improvement?

Well, really, we kept the comps very reasonable considering the new releases last year in video, and, you know, we did that with our core catalogue and we went after that business and did that very well in both music and video. So that’s what really – because those two categories are such a big percentage of the business, but we did do very well in the electronics and the trend also, and that helped with the comps, the negative comps. Brandon McMillan – Centurion Investment: Okay, sorry, but the actual comps in the categories, the music comp was negative 13%, is that right?

No, it was negative 13% in the top 50 [ph]. Brandon McMillan – Centurion Investment: Okay.

And it was –

Overall, it was down 3%.

It was down 3% overall. Brandon McMillan – Centurion Investment: Okay.

And that was really driven – and we had the ‘Avatar’ and the ‘New Moon’ last year which – Avatar was the biggest Blu-Ray release of the year last year for the year. Brandon McMillan – Centurion Investment: Right.

So, we listed that very well. Brandon McMillan – Centurion Investment: Okay. Great. And what was the video overall down?

Down 5%. Brandon McMillan – Centurion Investment: 5%?

Yes. Brandon McMillan – Centurion Investment: Okay. Great. Thank you. And the other question just was Bob, you said on the last call, sort of your signoff at the end of the call was, you know, you felt confident about continuing to improve the performance and obviously, you know, you have done so this quarter and you had a really good fourth quarter as well. But can you just talk a little bit about why you are feeling some confidence in things, I mean, you know not I guess a lot of people outside of these industries who would look at them and feel that confidence, and I know – you have been searching for other categories to try and drive positive comps and try and use some of the space from the exit of other product categories. But could you just talk a little bit about where your confidence is coming from and maybe just give a little bit of visibility also on what you are doing in electronics and trends, and what you plan to do to going forward?

Yeah. As far as the in the core business of music and video, there is no question that some of our major competitors have scaled back on the selection of merchandise they have. They still have the new releases in the top 50, but many of them have really cut back on their catalog selection and we think we are benefiting from that for sure. And as far as the trend merchandise, we did very well with Justin Bieber and it continued into May with the release of the video. So we would be concerned, I think, Justin Bieber headquarters, and we do very well with that in the trend category and that’s done well for us. And in the electronic category, our focus has been on the headphones and some other smaller accessories for the iPods and so forth – have done very well in those categories. As far as from expense point of view, we are looking at every part of the business and making sure that we do adjust expenses from the field level to right size it for the number of stores we have, and at the home office doing the same thing, and that’s been a very successful program. We are looking at every expense item and making sure that it's an item that doesn't need to be challenged. So in other words, we're challenging every expense item there is in the company and we are having good progress with that. Brandon McMillan – Centurion Investment: Okay. I mean, I guess, generally speaking from a strategic point of view, I mean, in the categories like trend and maybe there’s something tend to electronics that can weigh out with your product strategy. But can you just talk a little about, sort of maybe your overall strategy for the stores, anything that is changing over the next year, or just, maybe your sense of make the right direction and a continuation of where square footage is just going to go, what categories and any thoughts you have about overall direction and strategy?

Yeah. First of all, I think one of the key things, we felt last year, we did not do a good job in the visual presentation of the stores and that is something, we’ve started improving on and we still don't have it at the level we want to have map, but they will be no later than the third quarter for sure and it will be taking place in the second quarter. So the general look of the store will be very much improved. As far as the layout by product area, our plan is to maintain the inventory selection in DVD, BluRay, music and continue to offer the selection in those, as well as have very strong promotions around those categories. And as far as the electronic and the trend, we will just focus on what those areas that we do well on and then expand in those areas that we do well on and make sure we don't get into some things that we don't know anything about. So, we'll be doing some experimenting like visiting our store, you’ll see, we put in great t-shirt departments and they're doing well. Brandon McMillan – Centurion Investment: Okay. Okay. Appreciate it. Thank you.

(Operator Instructions). There are no further questions at this time, sir.

Okay. So, we’ll conclude the call. I’d just like to take this opportunity to thank all of our associates, vendors and customers and we look forward to talking to you about our second quarter results on August 18. Thank you very much for your time today. Thank you, Duranda [ph] for taking your time also.

You're welcome, sir.

Thanks.

Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program. You may disconnect and have a wonderful day.