10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

S QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED AUGUST 3, 2013

OR

£ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT FOR THE TRANSITION PERIOD FROM                   TO                  

COMMISSION FILE NUMBER: 0-14818

TRANS WORLD ENTERTAINMENT CORPORATION

(Exact name of registrant as specified in its charter)

New York	14-1541629
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Number)

38 Corporate Circle

Albany, New York 12203

(Address of principal executive offices, including zip code)

(518) 452-1242

(Registrant’s telephone number, including area code)

Indicate by a check mark whether the Registrant (1) has filed all reports required to be filed by Sections 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes S No £

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definition of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer   £	Accelerated filer   £	Non-accelerated filer   £
Smaller reporting company   S

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes £ No S

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Common Stock, $.01 par value,

33,147,441 shares outstanding as of August 3, 2013

TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES

QUARTERLY REPORT ON FORM 10-Q

INDEX TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

	Form 10-Q Page No.
PART I. FINANCIAL INFORMATION
Item 1 – Interim Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets at August 3 2013, February 2, 2013 and July 28, 2012		3
Condensed Consolidated Statements of Operations – Thirteen and Twenty-six Weeks Ended August 3, 2013 and July 28, 2012		4
Condensed Statements of Comprehensive Income – Thirteen and Twenty-Six Weeks Ended August 3, 2013 and July 28, 2012		5
Condensed Consolidated Statements of Cash Flows – Twenty-Six Weeks Ended August 3, 2013 and July 28, 2012		6
Notes to Condensed Consolidated Financial Statements		7
Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations		13
Item 3 – Quantitative and Qualitative Disclosures about Market Risk		21
Item 4 – Controls and Procedures		21
PART II.  OTHER INFORMATION
Item 1 – Legal Proceedings		22
Item 1A- Risk Factors		22
Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds		22
Item 3 – Defaults Upon Senior Securities		22
Item 4 – Mine Safety Disclosures		22
Item 5 – Other Information		22
Item 6 – Exhibits		22
Signatures		23

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TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES

PART 1. FINANCIAL INFORMATION

Item 1 - Financial Statements

CONDENSED CONSOLIDATED BALANCE SHEETS

(in thousands, except per share and share amounts)

(unaudited)

	August 3,			February 2,			July 28,
	2013			2013			2012
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	95,252		$	132,982		$	58,252
Merchandise inventory		151,451			155,429			161,972
Other current assets		11,611			9,365			7,737
Total current assets		258,314			297,776			227,961
NET FIXED ASSETS		11,654			9,057			15,368
OTHER ASSETS		8,794			8,407			8,402
TOTAL ASSETS	$	278,762		$	315,240		$	251,731
LIABILITIES
CURRENT LIABILITIES:
Accounts payable	$	50,309		$	79,438		$	41,496
Accrued expenses and other current liabilities		8,936			10,122			10,616
Accrued incentives		85			7,667			137
Deferred revenue		10,094			10,464			10,391
Current portion of capital lease obligations		999			936			878
Total current liabilities		70,423			108,627			63,518
CAPITAL LEASE OBLIGATIONS, less current portion		1,488			2,004			2,488
OTHER LONG-TERM LIABILITIES		24,468			23,849			22,840
TOTAL LIABILITIES		96,379			134,480			88,846
SHAREHOLDERS’ EQUITY
Preferred stock ($0.01 par value; 5,000,000 shares authorized; none issued)		—			—			—
Common stock ($0.01 par value; 200,000,000 shares authorized; 58,166,572, 56,728,146 and 56,557,994 shares issued, respectively)		582			567			566
Additional paid-in capital		314,394			309,451			308,920
Treasury stock at cost (25,520,605, 25,102,990 and 25,102,990 shares, respectively)		(220,308	)		(217,555	)		(217,555	)
Accumulated other comprehensive loss		(2,416	)		(2,774	)		(2,157	)
Retained earnings		90,131			91,071			73,111
TOTAL SHAREHOLDERS’ EQUITY		182,383			180,760			162,885
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	278,762		$	315,240		$	251,731

See Accompanying Notes to Condensed Consolidated Financial Statements.

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TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in thousands, except per share amounts)

(unaudited)

	Thirteen Weeks Ended						Twenty-six Weeks Ended
	August 3,			July 28,			August 3,			July 28,
	2013			2012			2013			2012
Net sales	$	80,768		$	91,038		$	174,702		$	203,325
Cost of sales		48,754			55,220			106,899			125,692
Gross profit		32,014			35,818			67,803			77,633
Selling, general and administrative expenses		34,018			37,135			67,677			75,337
Income (loss) from operations		(2,004	)		(1,317	)		126			2,296
Interest expense, net		487			522			970			1,292
Income (loss) before income tax expense		(2,491	)		(1,839	)		(844	)		1,004
Income tax expense		48			47			96			94
Net income (loss)	$	(2,539	)	$	(1,886	)	$	(940	)	$	910
BASIC AND DILUTED INCOME (LOSS) PER SHARE:
Basic income (loss) per share	$	(0.08	)	$	(0.06	)	$	(0.03	)	$	0.03
Weighted average number of common shares outstanding – basic		33,147			31,537			32,717			31,537
Diluted income (loss) per share	$	(0.08	)	$	(0.06	)	$	(0.03	)	$	0.03
Weighted average number of common shares outstanding – diluted		33,147			31,537			32,717			31,643

See Accompanying Notes to Condensed Consolidated Financial Statements.

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TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

	Thirteen Weeks Ended						Twenty-six Weeks Ended
	August 3,			July 28,			August 3,			July 28,
	2013			2012			2013			2012
Net income (loss)	$	(2,539	)	$	(1,886	)	$	(940	)	$	910
Amortization of prior service cost		179			86			358			172
Comprehensive income (loss)	$	(2,360	)	$	(1,800	)	$	(582	)	$	1,082

See Accompanying Notes to Condensed Consolidated Financial Statements.

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TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

	Twenty-six Weeks Ended
	August 3,			July 28,
	2013			2012
Net cash used by operating activities	$	(34,628	)	$	(27,169	)
Cash flows from investing activities:
Purchases of fixed assets		(4,682	)		(948	)
Net cash used by investing activities		(4,682	)		(948	)
Cash flows from financing activities:
Payments of long-term debt		—			(1,748	)
Payments of capital lease obligations		(453	)		(398	)
Exercise of stock options		4,786			—
Purchase of treasury stock		(2,753	)		—
Net cash provided (used) by financing activities		1,580			(2,146	)
Net decrease in cash and cash equivalents		(37,730	)		(30,263	)
Cash and cash equivalents, beginning of period		132,982			88,515
Cash and cash equivalents, end of period	$	95,252		$	58,252
Issuance of shares under deferred share plan	$	50			—

See Accompanying Notes to Condensed Consolidated Financial Statements.

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TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

August 3, 2013 and July 28, 2012

Note 1. Nature of Operations

Trans World Entertainment Corporation and subsidiaries (“the Company”) is one of the largest specialty retailers of entertainment products, including video, music, electronics, trend, video games and related products in the United States. The Company operates a chain of retail entertainment stores, primarily under the names f.y.e. for your entertainment and Suncoast Motion Pictures, and e-commerce sites, www.fye.com, www.wherehouse.com, and www.secondspin.com in a single industry segment. As of August 3, 2013, the Company operated 355 stores totaling approximately 2.1 million square feet in the United States, the District of Columbia and the Commonwealth of Puerto Rico.

Liquidity and Cash Flows:

The Company’s primary sources of working capital are cash and cash equivalents on hand, cash provided by operations and borrowing capacity under its revolving credit facility (See Note 6 for further details). The Company’s cash flows fluctuate from quarter to quarter due to various items, including seasonality of sales and earnings, merchandise inventory purchases and returns and the related terms on the purchases and capital expenditures. Management believes it will have adequate resources to fund its cash needs for the next twelve months and beyond, including its capital spending, its seasonal increase in merchandise inventory and other operating cash requirements and commitments. During Fiscal 2012, management carried out certain strategic initiatives in its efforts to reduce certain operating costs. In addition, management closed 33 stores and plans to continue its evaluation of profitability of the Company’s stores in consideration of lease terms, conditions and expirations, including considering new and relocated stores. Management has continued many of the initiatives begun in 2012 as part of the execution of its operating plan for 2013, including a focus on improved product selection based on customer preferences and industry changes, as well as further streamlining of its operations. The Company opened 9 stores and closed 12 stores during the twenty-six weeks ended August 3, 2013.

Based on the Company’s current cash position, the Board of Directors approved a stock repurchase plan (See Note 10 for further details).

Seasonality:

The Company’s business is seasonal, with the fourth fiscal quarter constituting the Company’s peak selling period. In fiscal 2012, the fourth quarter accounted for approximately 36% of annual net sales. The fourth quarter of fiscal 2012 consisted of 14 weeks. In anticipation of increased sales activity in the fourth quarter, the Company purchases additional inventory and hires seasonal associates to supplement its core store sales and distribution center staff. If, for any reason, the Company’s sales were below seasonal norms during the fourth quarter, the Company’s operating results could be adversely affected. Quarterly sales can also be affected by the timing of new product releases, new store openings, store closings and the performance of existing stores.

Note 2: Basis of Presentation

The accompanying unaudited condensed consolidated financial statements consist of Trans World Entertainment Corporation, its wholly-owned subsidiary, Record Town, Inc. (“Record Town”), and

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Record Town’s subsidiaries, all of which are wholly-owned. All significant intercompany accounts and transactions have been eliminated.

The interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished in these unaudited condensed consolidated financial statements reflects all normal, recurring adjustments which, in the opinion of management, are necessary for the fair presentation of such financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. During the twenty-six weeks ended August 3, 2013, the Company recorded a prior period adjustment to the value of its inventory, which increased cost of sales and decreased gross margin by approximately $0.3 million. The cumulative effect of this adjustment is deemed immaterial. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to rules and regulations applicable to interim financial statements. Certain prior period amounts have been reclassified to conform to the current presentation.

The information presented in the accompanying unaudited condensed consolidated balance sheet as of February 2, 2013 has been derived from the Company’s February 2, 2013 audited consolidated financial statements. All other information has been derived from the Company’s unaudited condensed consolidated financial statements as of and for the thirteen and twenty-six weeks ended August 3, 2013 and July 28, 2012. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2013.

The Company’s significant accounting policies are the same as those described in Note 1 to the Company’s Consolidated Financial Statements on Form 10-K for the fiscal year ended February 2, 2013.

Note 3. Recently Adopted Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which adds additional disclosure requirements relating to the reclassification of items out of accumulated other comprehensive income.  This ASU was effective for the first quarter of 2013 for the Company. The adoption of this guidance does not have a significant impact on the Company’s condensed consolidated financial statements.

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Note 4. Stock Based Compensation

Total stock-based compensation expense recognized in the condensed consolidated statements of operations for the twenty-six weeks ended August 3, 2013 and July 28, 2012 was approximately $73,000 and $60,000, respectively, before income taxes. No deferred tax benefit was recorded against stock-based compensation expense for the twenty-six weeks ended August 3, 2013 and July 28, 2012.

As of August 3, 2013, there was approximately $1.0 million of unrecognized compensation cost related to stock award awards that is expected to be recognized as expense over a weighted average period of 1.9 years.

As of August 3, 2013, stock awards authorized for issuance under the Company’s plans total 20.6 million. There are certain authorized stock awards for which the Company no longer grants awards. Of these awards authorized for issuance, 3.3 million were granted and are outstanding, 2.5 million of which were vested and exercisable. Awards available for future grants at August 3, 2013 were 2.4 million.

The table below outlines the assumptions that the Company used to estimate the fair value of stock based awards granted during the twenty-six weeks ended August 3, 2013:

Dividend yield	0%
Expected stock price volatility	71.6%-75.2%
Risk-free interest rate	0.8%
Expected award life (in years)	4.9-5.7
Weighted average fair value per share of awards granted during the period	$2.93

The following table summarizes stock award activity during the twenty-six weeks ended August 3, 2013:

	Employee and Director Stock Award Plans
	Number of Shares Subject To Option			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Other Share Awards(1)		Weighted Average Grant Date Fair Value
Balance February 2, 2013		4,663,909		$	6.45		2.7		93,037	$	6.04
Granted		270,000			4.74		9.9		—		—
Exercised		(1,427,450	)		3.35		—		—		—
Forfeited		(10,000	)		1.79		—		—		—
Canceled		(242,409	)		8.46		—		—		—
Balance August 3, 2013		3,254,050		$	7.54		3.9		93,037	$	6.04
Exercisable August 3, 2013		2,365,300		$	9.23		2.2		93,037	$	6.04

(1) Other Share Awards include deferred shares granted to Directors and restricted stock units issued to employees.

As of August 3, 2013, the intrinsic value of stock awards outstanding was $2.3 million and exercisable was $0.4 million.

Note 5. Defined Benefit Plans

The Company maintains a non-qualified Supplemental Executive Retirement Plan (“SERP”) for certain

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executive officers of the Company. The SERP provides eligible executives defined pension benefits that supplement benefits under other retirement arrangements.

Prior to June 1, 2003, the Company had provided the Board of Directors with a noncontributory, unfunded retirement plan (“Director Retirement Plan”) that paid retired directors an annual retirement benefit. Directors who were not yet vested in their retirement benefits as of June 1, 2003 had the present value of benefits already accrued as of the effective date converted to deferred shares of the Company’s Common Stock. Directors that were fully or partially vested in their retirement benefits were given a one-time election to continue to participate in the current retirement program or convert the present value of their benefits to deferred shares.

The measurement date for the SERP and Director Retirement Plan is fiscal year end, using actuarial techniques which reflect estimates for mortality, turnover and expected retirement. In addition, management makes assumptions concerning future salary increases. Discount rates are generally established as of the measurement date using theoretical bond models that select high-grade corporate bonds with maturities or coupons that correlate to the expected payouts of the applicable liabilities.

The following represents the components of the net periodic pension cost related to the Company’s SERP and Director Retirement Plan for the respective periods:  

	Thirteen weeks ended					Twenty-six weeks ended
	August 3, 2013			July 28, 2012		August 3, 2013			July 28, 2012
	(in thousands)					(in thousands)
Service cost	$	28		$	22	$	56		$	44
Interest cost		164			159		328			318
Amortization of prior service cost		180			86		360			172
Amortization of net gain		(1	)		—		(2	)		—
Net periodic pension cost	$	371		$	267	$	742		$	534

During the twenty-six weeks ended August 3, 2013, the Company did not make any cash contributions to the SERP or the Director Retirement Plan, and presently expects to pay approximately $103,000 in benefits relating to the SERP and $49,000 in benefits relating to the Director Retirement Plan during Fiscal 2013.

Note 6. Line of Credit

In May 2012, the Company entered into a $75 million credit facility (“Second Amended Credit Facility”) which amended its previous $100 million credit facility (“Amended Credit Facility”). The principal amount of all outstanding loans under the Second Amended Credit Facility together with any accrued but unpaid interest, are due and payable in May 2017, unless otherwise paid earlier pursuant to the terms of the Second Amended Credit Facility. Payments of amounts due under the Second Amended Credit Facility are secured by the assets of the Company.

The Second Amended Credit Facility includes customary provisions, including affirmative and negative covenants, which include representations, warranties and restrictions on additional indebtedness and acquisitions. The Second Amended Credit Facility also includes customary events of default, including, among other things, material adverse effect, bankruptcy, and certain changes of control. The Second Amended Credit Facility also contains other terms and conditions, including covenants around the

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number of store closings and allows for the payment of dividends with certain restrictions. It also changed the formula for interest rates. The Company is compliant with all covenants.

Interest under the Second Amended Credit Facility will accrue, at the election of the Company, at a Base Rate or LIBO Rate, plus, in each case, an Applicable Margin, which is determined by reference to the level of availability as defined in the Credit Agreement, with the Applicable Margin for LIBO Rate loans ranging from 2.25% to 2.75% and the Applicable Margin for Prime Rate loans ranging from 0.75% to 1.25%. In addition, a commitment fee ranging from 0.375% to 0.50% is also payable on unused commitments.

The availability under the Second Amended Credit Facility is subject to limitations based on sufficient inventory levels. Based on inventory levels at the end of the quarter, the availability under the Second Amended Credit Facility was $51.1 million as of August 3, 2013. As of August 3, 2013, the Company did not have any borrowings outstanding under the Second Amended Credit Facility and had $0.1 million in outstanding letter of credit obligations. The Company did not have any borrowings during the first half of Fiscal 2013.

As of July 28, 2012, the Company did not have any borrowings outstanding under the Amended Credit Facility and had $0.7 million in outstanding letter of credit obligations. The Company did not have any borrowings during the first half of Fiscal 2012.

Note 7. Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) that the Company reports in the condensed consolidated balance sheets represents the excess of accrued pension liability over accrued benefit cost, net of taxes, associated with the Company’s defined benefit plans. Comprehensive income or loss consists of net income or loss and the reclassification of prior service costs previously reported in comprehensive income (loss) for the thirteen and twenty-six weeks ended August 3, 2013 and July 28, 2012. Amortization of prior service cost is recorded under selling, general and administrative expenses in the condensed consolidated statements of operations.

Note 8. Depreciation and Amortization of Fixed Assets

Depreciation and amortization of fixed assets included in the condensed consolidated statements of operations is as follows:

	Thirteen Weeks Ended				Twenty-six Weeks Ended
	August 3, 2013		July 28, 2012		August 3, 2013		July 28, 2012
	(in thousands)				(in thousands)
Cost of sales	$	120	$	124	$	244	$	250
Selling, general and administrative expenses		861		885		1,685		1,826
Total	$	981	$	1,009	$	1,929	$	2,076

Note 9. Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing net income (loss) by the weighted average common shares outstanding for the period. Diluted income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into

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common stock or resulted in the issuance of common stock (net of any assumed repurchases) that then shared in the earnings of the Company, if any. It is computed by dividing net income (loss) by the sum of the weighted average shares outstanding and additional common shares that would have been outstanding if the dilutive potential common shares had been issued for the Company’s common stock awards from the Company’s Stock Award Plans.

Weighted average shares are calculated as follows:

	Thirteen weeks ended				Twenty-six weeks ended
	August 3, 2013		July 28, 2012		August 3, 2013		July 28, 2012
	(in thousands)				(in thousands)
Weighted average common shares outstanding – basic		33,147		31,537		32,717		31,537
Dilutive effect of employee stock options		—		—		—		106
Weighted average common shares outstanding–diluted		33,147		31,537		32,717		31,643

For the thirteen and twenty-six week periods ended August 3, 2013 and the thirteen week period ended July 28, 2012, the impact of all outstanding stock awards was not considered because the Company reported a net loss and such impact would be anti-dilutive. Accordingly, basic and diluted loss per share is the same. For the twenty-six week period ended July 28, 2012, the impact of 4.4 million outstanding stock awards was not considered because such impact would be anti-dilutive.

Note 10. Shareholders’ Equity

As of August 3, 2013, the Company repurchased approximately 418,000 shares of common stock at an average price of $5.10 per share, for an aggregate purchase price of $2.8 million, including direct fees related to the purchase of shares. The Company repurchased these shares via a tender offer in accordance with the stock repurchase program approved by the Board of Directors utilizing cash on hand. The Company classified the repurchased shares as treasury stock on the Company’s balance sheet.

On August 22, 2013, the Company’s Board of Directors approved a program to repurchase up to $22 million of the Company’s outstanding common stock. Under the repurchase program, the Company has the authority to repurchase shares in the open market, or through negotiated transactions from time to time. The amount and timing of any purchases will depend upon market and business conditions, including the price and availability of the Company’s shares, trading volume and the attractiveness of business opportunities amongst other things. The repurchased shares are expected to remain in treasury.

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TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES

PART 1. FINANCIAL INFORMATION

Item 2 - Management’s Discussion and Analysis of Financial Condition and

Results of Operations

August 3, 2013 and July 28, 2012

Overview

Management’s Discussion and Analysis of Financial Condition and Results of Operations provides information that the Company’s management believes necessary to achieve an understanding of its financial statements and results of operations. To the extent that such analysis contains statements which are not of a historical nature, such statements are forward-looking statements, which involve risks and uncertainties. These risks include, but are not limited to, changes in the competitive environment for the Company’s merchandise, including the entry or exit of non-traditional retailers of the Company’s merchandise to or from its markets; releases by the music, video and video games industries of an increased or decreased number of “hit releases”; general economic factors in markets where the Company’s merchandise is sold; and other factors discussed in the Company’s filings with the Securities and Exchange Commission. The following discussion and analysis of the Company’s financial condition and results of operations should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included elsewhere in this report and the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2013.

At August 3, 2013, the Company operated 355 stores totaling approximately 2.1 million square feet in the United States, the District of Columbia and the Commonwealth of Puerto Rico. The Company’s stores offer predominantly entertainment product, including video and music. In total, these two categories represented 77% of the Company’s net sales for the twenty-six weeks ended August 3, 2013. The balance of categories, including trend, electronics, video games and related products represented 23% of the Company’s net sales for the twenty-six weeks ended August 3, 2013.

The Company’s results have been, and will continue to be, contingent upon management’s ability to understand industry trends and to manage the business in response to those trends and general economic trends. Management monitors a number of key performance indicators to evaluate its performance, including:

Net sales and comparable store net sales: The Company measures and reports the rate of comparable store net sales change. A store is included in comparable store net sales calculations at the beginning of its thirteenth full month of operation. Stores relocated/expanded or downsized are excluded from comparable store net sales if the change in square footage is greater than 20%. Closed stores that were open for at least thirteen months are included in comparable store net sales through the month immediately preceding the month of closing. The Company further analyzes net sales by store format and by product category.

Cost of Sales and Gross Profit: Gross profit is impacted primarily by the mix of products sold, by discounts negotiated with vendors and discounts offered to customers. The Company records its distribution and product shrink expenses in cost of sales. Distribution expenses include those costs associated with receiving, shipping, inspecting and warehousing product and costs associated with product returns to vendors. Cost of sales further includes obsolescence costs and is reduced by the benefit of vendor allowances, net of direct reimbursements of expense.

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Selling, General and Administrative (“SG&A”) Expenses: Included in SG&A expenses are payroll and related costs, occupancy charges, general operating and overhead expenses and depreciation charges (excluding those related to distribution operations, as disclosed in Note 8 to the condensed consolidated financial statements). SG&A expenses also include asset impairment charges and write-offs, if any, and miscellaneous items, other than interest.

Balance Sheet and Ratios: The Company views cash, net inventory investment (merchandise inventory less accounts payable) and working capital (current assets less current liabilities) as relevant indicators of its financial position. See Liquidity and Capital Resources for further discussion of these items.

RESULTS OF OPERATIONS

Thirteen and Twenty-six Weeks Ended August 3, 2013

Compared to the Thirteen and Twenty-six Weeks Ended July 28, 2012

The following table sets forth a period over period comparison of the Company’s net sales by category:

	Thirteen weeks ended															Twenty-six weeks ended
	August 3, 2013			July 28, 2012			Change			%			Comp Store Net Sales			August 3, 2013			July 28, 2012			Change			%			Comp Store Sales
	(in thousands, except store data)															(in thousands, except store data))
Net sales	$	80,768		$	91,038		$	(10,270	)		(11.3	%)		(3.6	%)	$	174,702		$	203,325			(28,623	)		(14.1	%)		(5.2	%)
As a % of sales
Video		44.0	%		43.3	%								(2.9	%)		45.1	%		43.5	%								(1.1	%)
Music		32.0	%		33.4	%								(7.4	%)		31.7	%		33.3	%								(12.3	%)
Trend		11.6	%		9.0	%								18.7	%		9.3	%		8.4	%								14.4	%
Electronics		9.0	%		10.3	%								(13.1	%)		9.7	%		10.4	%								(15.7	%)
Video Games		3.4	%		4.0	%								(10.7	%)		4.2	%		4.4	%								(8.5	%)
Store Count:																	355			379			(24	)		(6.3	%)

Net sales. Net sales decreased 11.3% and 14.1% during the thirteen and twenty-six weeks ended August 3, 2013, respectively, as compared to the same periods last year. The decline in net sales for the thirteen week period resulted from a decrease in store count of 6.9% and a 3.6% decrease in comparable net sales. The decline in net sales for the twenty-six week period resulted from a decrease in store count of 6.3% and a 5.2% decrease in comparable net sales. While the Company believes a meaningful amount of net sales from the closed stores was transferred to ongoing stores, there was a reduction of net sales resulting from store closings.

Video:

Comparable store net sales in the video category decreased 2.9% and 1.1% during the thirteen and twenty-six weeks ended August 3, 2013, respectively. The decrease in the second quarter was driven by a lack of new releases. The video category represented 44.0% of total net sales for the thirteen weeks ended August 3, 2013 compared to 43.3% in the comparable quarter last year.

According to Warner Brothers Home Video, industry sales were down 8% during the period corresponding to the Company’s second fiscal quarter.

14

Music:

Comparable store net sales in the music category decreased 7.4% and 12.3% during the thirteen weeks and twenty-six weeks ended August 3, 2013 respectively. The second quarter decline was a significant improvement from the 16% decline in the first quarter driven by an improved performance in both new releases and catalog sales. The music category represented 32.0% of total net sales for the thirteen ended August 3, 2013 compared to 33.4% in the comparable quarter last year.

According to Soundscan, total physical CD unit sales industry-wide were down 12% during the period corresponding to the Company’s second fiscal quarter.

Trend:

Comparable store net sales in the trend category increased 18.7% and 14.4% during the thirteen and twenty-six weeks ended August 3, 2013, respectively. The increase was driven by expanded product lines and improved selection. Trend product represented 11.6% of total net sales for the thirteen weeks ended August 3, 2013 compared to 9.0% in the comparable quarter last year.

Electronics:

Comparable store net sales in the electronics category decreased 13.1% and 15.7% during the thirteen and twenty-six weeks ended August 3, 2013, respectively. Electronics net sales represented 9.0% of total net sales for the thirteen ended August 3, 2013 compared to 10.3% in the comparable quarter last year.

Video Games:

Comparable store net sales for video games decreased 10.7% and 8.5% during the thirteen and twenty-six weeks ended August 3, 2013, respectively. Currently, 97 stores, or 27.0% of the Company’s stores carry games. Video games net sales represent 3.4% of total net sales for the thirteen weeks ended August 3, 2013 compared to 4.0% in the comparable quarter last year.

According to NPD Group, industry sales were down 20% during the period corresponding to the Company’s second fiscal quarter.

Gross Profit. The following table sets forth a period over period comparison of the Company’s gross profit:

	Thirteen weeks ended (in thousands)						Change						Twenty-six weeks ended (in thousands)						Change
	August 3, 2013			July 28, 2012			$			%			August 3, 2013			July 28, 2012			$			%
Gross Profit	$	32,014		$	35,818		$	(3,804	)		(10.6	%)	$	67,803		$	77,633		$	(9,830	)		(12.7	%)
As a % of sales		39.6	%		39.3	%								38.8	%		38.2	%

Gross profit dollars decreased 10.6% and 12.7% for the thirteen and twenty-six weeks ended August 3, 2013, respectively as compared to the same period last year. The decline in gross profit dollars is due to the decline in net sales. The decline in net sales was partially offset by an increase in gross profit as a percentage of net sales due to higher margin rates in most product categories.

SG&A Expenses. The following table sets forth a period over period comparison of the Company’s SG&A expenses:

15

	Thirteen weeks ended (in thousands)						Change						Twenty-six weeks ended (in thousands)						Change
	August 3, 2013			July 28, 2012			$			%			August 3, 2013			July 28, 2012			$			%
SG&A	$	34,018		$	37,135		$	(3,117	)		(8.4	%)	$	67,677		$	75,337		$	(7,660	)		(10.2	%)
As a % of sales		42.1	%		40.8	%								38.8	%		37.1	%

For the thirteen weeks ended August 3, 2013, SG&A expenses decreased $3.1 million, or 8.4% on the net sales decline of 11.3% resulting in a 130 basis point increase in SG&A expenses as a percentage of net sales. The increase in SG&A as a percentage of net sales is primarily due to higher overhead expenses.

For the twenty-six weeks ended August 3, 2013, SG&A expenses decreased $7.7 million, or 10.2% on the net sales decline of 14.1% resulting in a 160 basis point increase in SG&A expenses as a percentage of net sales. The increase in SG&A as a percentage of net sales is primarily due to higher overhead expenses.

Interest Expense, Net. Net interest expense was $0.5 million and $1.0 million during the thirteen and twenty-six weeks ended August 3, 2013, respectively, compared to $0.5 million and $1.3 million during the thirteen and twenty-six weeks ended July 28, 2012. Net interest expense consists primarily of interest on capital leases, unused commitment fees and the amortization of fees related to the Company’s credit facility.

Income Tax Expense (Benefit).  In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent on the generation of future taxable income. As of January, 2012, the Company had incurred a cumulative three-year loss.  For the year ended February 2, 2013 the Company reported income before income taxes which included a large gain on sale of asset not expected to recur. Based on available objective evidence, management concluded that a full valuation allowance should be maintained against the Company’s deferred tax assets. A full valuation allowance continues to be recorded at August 3, 2013 against the Company’s deferred tax assets. If the Company continues its trend of pre-tax book income it believes that, based on consideration of all available evidence, including recent historical profitable operating performance and other positive and negative evidence such as financial and taxable income projections, market environment, and other factors, a determination may result during the next twelve months that a valuation allowance is no longer needed. The Company gives the most weight to the existence of cumulative losses in recent years in its evaluation of the need for a full valuation allowance. Any reversal of the Company’s valuation allowance will favorably impact its results of operations in the period of reversal. The Company is currently unable to determine when that reversal might occur, but it will continue to assess the realizability of its deferred tax assets and will adjust the valuation allowance if it is more likely than not that all or a portion of the deferred tax assets will become realizable in the future. The Company has significant net operating loss carry forwards and other tax attributes that are available to offset projected taxable income and current taxes payable for the year ending February 1, 2014.  The deferred tax impact resulting from the utilization of the net operating loss carry forwards and other tax attributes will be offset by a reduction in the valuation allowance.  As of February 2, 2013, the Company had a net operating loss carry forward of $153.4 million for federal income tax purposes and approximately $266 million for state income tax purposes that expire at various times through 2031 and are subject to certain limitations and statutory expiration periods.

For the thirteen and twenty-six week periods ended August 3, 2013 and July 28, 2012, the Company’s current tax expense was associated with quarter-specific items attributable to interest accruals on related

16

uncertain tax positions and state taxes based on modified gross receipts incurred for these thirteen and twenty-six week periods.

Net Income (loss). The following table sets forth a period over period comparison of the Company’s net income (loss):

	Thirteen weeks ended									Twenty-six weeks ended
	August 3, 2013			July 28, 2012			Change			August 3, 2013			July 28, 2012		Change
	(in thousands)									(in thousands)
Income (loss) before income tax	$	(2,491	)	$	(1,839	)		(652	)	$	(844	)	$	1,004	$	(1,848	)
Income tax expense		48			47			1			96			94		2
Net income (loss)	$	(2,539	)	$	(1,886	)	$	(653	)	$	(940	)	$	910	$	(1,850	)

For the thirteen weeks ended August 3, 2013, the Company’s net loss was $2.5 million compared to a loss of $1.9 million for the thirteen weeks ended July 28, 2012. The decrease was due to the decline in gross profit from lower net sales.

For the twenty-six weeks ended August 3, 2013, the Company’s net loss was $0.9 million, compared to net income of $0.9 million for the twenty-six weeks ended July 28, 2012. The decrease was due to the decline in gross profit from lower net sales.

LIQUIDITY

Liquidity and Cash Flows: The Company’s primary sources of working capital are cash and cash equivalents on hand, cash provided by operations and borrowing capacity under its revolving credit facility (See Note 6 to the condensed consolidated financial statements for further details). The Company’s cash flows fluctuate from quarter to quarter due to various items, including seasonality of net sales and earnings, merchandise inventory purchases and returns and the related terms on the purchases and capital expenditures. Management believes it will have adequate resources to fund its cash needs for the next twelve months and beyond, including its capital spending, its seasonal increase in merchandise inventory and other operating cash requirements and commitments. During Fiscal 2012, management carried out certain strategic initiatives in its efforts to reduce certain operating costs. In addition, management closed 33 stores and plans to continue its evaluation of profitability of the Company’s stores in consideration of lease terms, conditions and expirations, including considering new and relocated stores. Management has continued many of the initiatives begun in 2012 as part of the execution of its operating plan for 2013, including a focus on improved product selection based on customer preferences and industry changes, as well as further streamlining of its operations. The Company opened 9 stores and closed 12 stores during the twenty-six weeks ended August 3, 2013.

Based on the Company’s current cash position, the Board of Directors approved a stock repurchase plan (See Note 10 of the condensed consolidated financial statements for further details).

Management anticipates that any future cash requirements due to a shortfall in cash from operations would be funded by the Company’s cash and cash equivalents on hand and its revolving credit facility, discussed hereafter. The Company does not expect any material changes in the mix (between equity and debt) or the relative cost of capital resources.

17

The following table sets forth a summary of key components of cash flow and working capital for each of the twenty-six weeks ended August 3, 2013 and July 28, 2012, or at those dates:

	Twenty-six weeks ended						Change
(in thousands)	August 3, 2013			July 28, 2012			$
Operating Cash Flows	$	(34,628	)	$	(27,169	)	$	(7,459	)
Investing Cash Flows		(4,682	)		(948	)		(3,734	)
Financing Cash Flows		1,580			(2,146	)		3,726
Capital Expenditures		(4,682	)		(948	)		(3,735	)
Cash and Cash Equivalents		95,252			58,252			37,000
Merchandise Inventory		151,451			161,972			(10,251	)
Working Capital		187,891			164,443			23,448

The Company had cash and cash equivalents of $95.3 million at August 3, 2012, compared to $133.0 million at February 2, 2013 and $58.3 million at July 28, 2012. Merchandise inventory was $71 per square foot at August 3, 2013 versus $68 per square foot as of July 28, 2012.

Cash used by operating activities was $34.6 million for the twenty-six weeks ended August 3, 2013. The primary use of cash was a $29.1 million seasonal reduction of accounts payable and payment of $7.6 million in incentive payments, partially offset by a $4.0 million reduction in inventory. The Company’s merchandise inventory and accounts payable are influenced by the seasonality of its business. A significant reduction of accounts payable occurs annually in the fiscal first half, reflecting payments for merchandise inventory sold during the prior year’s holiday season.

Cash used by investing activities, which was constituted entirely of capital expenditures, was $4.7 million for the twenty-six weeks ended August 3, 2013.

Cash provided by financing activities was $1.6 million for the twenty-six weeks ended August 3, 2013. The company generated $4.8 million due to the exercise of stock options, offset by the repurchase of common stock of $2.8 million, including direct fees, in connection with our stock repurchase program.

On August 22, 2013, the Company’s Board of Directors approved a program to repurchase up to $22 million of the Company’s outstanding common stock. Under the repurchase program, the Company has the authority to repurchase shares in the open market, or through negotiated transactions from time to time. The amount and timing of any purchases will depend upon market and business conditions, including the price and availability of the Company’s shares, trading volume and the attractiveness of business opportunities amongst other things. The repurchased shares are expected to remain in treasury.

In May 2012, the Company entered into a $75 million credit facility (“Second Amended Credit Facility”) which amended its previous $100 million credit facility (“Amended Credit Facility”). The principal amount of all outstanding loans under the Second Amended Credit Facility together with any accrued but unpaid interest, are due and payable in May 2017, unless otherwise paid earlier pursuant to the terms of the Second Amended Credit Facility. Payments of amounts due under the Second Amended Credit Facility are secured by the assets of the Company.

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The Second Amended Credit Facility includes customary provisions, including affirmative and negative covenants, which include representations, warranties and restrictions on additional indebtedness and acquisitions. The Second Amended Credit Facility also includes customary events of default, including, among other things, material adverse effect, bankruptcy, and certain changes of control. The Second Amended Credit Facility also contains other terms and conditions, including covenants around the number of store closings and allows for the payment of dividends with certain restrictions. It also changed the formula for interest rates. The Company is compliant with all covenants.

Interest under the Second Amended Credit Facility will accrue, at the election of the Company, at a Base Rate or LIBO Rate, plus, in each case, an Applicable Margin, which is determined by reference to the level of availability as defined in the Credit Agreement, with the Applicable Margin for LIBO Rate loans ranging from 2.25% to 2.75% and the Applicable Margin for Prime Rate loans ranging from 0.75% to 1.25%. In addition, a commitment fee ranging from 0.375% to 0.50% is also payable on unused commitments.

The availability under the Second Amended Credit Facility is subject to limitations based on sufficient inventory levels. Based on inventory levels at the end of the quarter, the availability under the Second Amended Credit Facility was $51.1 million as of August 3, 2013. As of August 3, 2013, the Company didn’t have any borrowings outstanding under the Second Amended Credit Facility and had $0.1 million in outstanding letter of credit obligations. The Company did not have any borrowings during the first half of 2013.

As of July 28, 2012, the Company didn’t have any borrowings outstanding under the Amended Credit Facility and had $0.7 million in outstanding letter of credit obligations. The Company did not have any borrowings during the first half of fiscal 2012.

Capital Expenditures. During the twenty-six weeks ended August 3, 2013, the Company made capital expenditures of $4.7 million. The Company currently plans to spend approximately $10.0 million for capital expenditures in fiscal 2013.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The preparation of financial statements and related disclosures in conformity with accounting principles generally accepted in the United States requires that management apply accounting policies and make estimates and assumptions that affect results of operations and the reported amounts of assets and liabilities in the financial statements. Management continually evaluates its estimates and judgments including those related to merchandise inventory and return costs, income taxes and accounting for gift card liability. Management bases its estimates and judgments on historical experience and other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Form 10-K for the year ended February 2, 2013 includes a summary of the critical accounting policies and methods used by the Company in the preparation of its condensed consolidated

19

financial statements. There have been no material changes or modifications to the policies since February 2, 2013.

Recently Issued Accounting Pronouncements:

There are no recently issued accounting standards that are expected to have a material effect on our financial condition, results of operations or cash flows.

20

TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES

PART I – FINANCIAL INFORMATION

Item 3 - Quantitative and Qualitative Disclosures about Market Risk

To the extent the Company borrows under its Second Amended Credit Facility, the Company is subject to risk resulting from interest rate fluctuations since interest on the Company’s borrowings under its Second Amended Credit Facility can be variable. Interest under the Second Amended Credit Facility will accrue, at the election of the Company, at a Base Rate or LIBO Rate, plus, in each case, an Applicable Margin, which is determined by reference to the level of availability as defined in the Second Amended Credit Agreement, with the Applicable Margin for LIBO Rate loans ranging from 2.25% to 2.75% and the Applicable Margin for Base Rate loans ranging from 0.75% to 1.25%. If interest rates on the Company’s Second Amended Credit Facility were to increase by 25 basis points, and to the extent borrowings were outstanding, for every $1,000,000 outstanding on the facility, income before income taxes would be reduced by $2,500 per year. For a discussion of the Company’s accounting policies for financial instruments and further disclosures relating to financial instruments, see “Nature of Operations and Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for the year ended February 2, 2013. The Company does not currently hold any derivative instruments.

Item 4 – Controls and Procedures

(a)    Evaluation of disclosure controls and procedures.    The Company’s Chief Executive Officer and Chief Financial Officer, after evaluating the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in the Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) as of August 3, 2013, have concluded that as of such date the Company’s disclosure controls and procedures were effective and designed to ensure that (i) information required to be disclosed by the issuer in the reports that it files or submits under the Securities Exchange Act of 1934 (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms and (ii) information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

 (b)    Changes in internal controls.    There have been no changes in the Company’s internal controls over financial reporting that occurred during the fiscal quarter covered by this quarterly report that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

21

TRANS WORLD ENTERTAINMENT CORPORATION AND SUBSIDIARIES

PART II - OTHER INFORMATION

Item 1 – Legal Proceedings

The Company is subject to legal proceedings and claims that have arisen in the ordinary course of its business and have not been finally adjudicated. Although there can be no assurance as to the ultimate disposition of these matters, it is management’s opinion, based upon the information available at this time, that the expected outcome of these matters, individually and in the aggregate, will not have a material adverse effect on the results of operations and financial condition of the Company.

Item 1A – Risk Factors

Risks relating to the Company’s business and Common Stock are described in detail in Item 1A of the Company’s most recently filed Annual Report on Form 10-K for the year ended February 2, 2013.

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3 – Defaults Upon Senior Securities

None.

Item 4 – Mine Safety Disclosure

Not Applicable.

Item 5 – Other Information

None.

Item 6 - Exhibits

(A) Exhibits -

Exhibit No.	Description
31.1	Chief Executive Officer certification pursuant to Section 302 of the  Sarbanes-Oxley Act of 2002.
31.2	Chief Financial Officer certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32	Certification pursuant to 18 U.S.C Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS	XBRL Instance Document (furnished herewith)
101.SCH	XBRL Taxonomy Extension Schema (furnished herewith)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase (furnished herewith)
101.DEF	XBRL Taxonomy Extension Definition Linkbase (furnished herewith)
101.LAB	XBRL Taxonomy Extension Label Linkbase (furnished herewith)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase (furnished herewith)

22

SIGNATURES

Pursuant to the requirements of the Securities and Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

TRANS WORLD ENTERTAINMENT CORPORATION

September 12, 2013	By: /s/ Robert J. Higgins
	Robert J. Higgins
	Chairman and Chief Executive Officer
	(Principal Executive Officer)
September 12, 2013	By: /s/ John Anderson
	John Anderson
	Chief Financial Officer
	(Principal and Chief Accounting Officer)

23

EX-31.1

Exhibit 31.1

CHIEF EXECUTIVE OFFICER CERTIFICATION PURSUANT TO SECTION 302 OF SARBANES OXLEY ACT 2002

 I, Robert J. Higgins certify that:

(1) I have reviewed this report on Form 10–Q of the Registrant;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:   September 12, 2013

/s/ Robert J. Higgins

Robert J. Higgins

Chairman and Chief Executive Officer

Trans World Entertainment Corporation

EX-31.2

Exhibit 31.2

CHIEF FINANCIAL OFFICER CERTIFICATION PURSUANT TO SECTION 302 OF SARBANES OXLEY ACT 2002

I, John Anderson, Chief Financial Officer of Trans World Entertainment Corporation (the “Registrant”), certify that:

(1) I have reviewed this report on Form 10–Q of the Registrant;

(2) Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

(3) Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

(4) The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c. Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d. Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

(5) The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Dated:   September 12, 2013

/s/ John Anderson

John Anderson

Chief Financial Officer

Trans World Entertainment Corporation

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Trans World Entertainment Corporation (the “Company”) on Form 10-Q for the period ending August 3, 2013 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), we, Robert J. Higgins, Chairman and Chief Executive Officer of the Company and John Anderson, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of our knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Robert J. Higgins	/s/ John Anderson
Robert J. Higgins	John Anderson
Chairman and Chief Executive Officer	Chief Financial Officer
September 12, 2013	September 12, 2013

XML

Accounting Policies, by Policy (Policies)

6 Months Ended

Aug. 03, 2013

Accounting Policies [Abstract]

Liquidity Disclosure [Policy Text Block]

Liquidity and Cash Flows:

The Company’s primary sources of working capital are cash and cash equivalents on hand, cash provided by operations and borrowing capacity under its revolving credit facility (See Note 6 for further details). The Company’s cash flows fluctuate from quarter to quarter due to various items, including seasonality of sales and earnings, merchandise inventory purchases and returns and the related terms on the purchases and capital expenditures. Management believes it will have adequate resources to fund its cash needs for the next twelve months and beyond, including its capital spending, its seasonal increase in merchandise inventory and other operating cash requirements and commitments. During Fiscal 2012, management carried out certain strategic initiatives in its efforts to reduce certain operating costs. In addition, management closed 33 stores and plans to continue its evaluation of profitability of the Company’s stores in consideration of lease terms, conditions and expirations, including considering new and relocated stores. Management has continued many of the initiatives begun in 2012 as part of the execution of its operating plan for 2013, including a focus on improved product selection based on customer preferences and industry changes, as well as further streamlining of its operations. The Company opened 9 stores and closed 12 stores during the twenty-six weeks ended August 3, 2013.

Based on the Company’s current cash position, the Board of Directors approved a stock repurchase plan (See Note 10 for further details).

Seasonality [Policy Text Block]

Seasonality:

The Company’s business is seasonal, with the fourth fiscal quarter constituting the Company’s peak selling period. In fiscal 2012, the fourth quarter accounted for approximately 36% of annual net sales. The fourth quarter of fiscal 2012 consisted of 14 weeks. In anticipation of increased sales activity in the fourth quarter, the Company purchases additional inventory and hires seasonal associates to supplement its core store sales and distribution center staff. If, for any reason, the Company’s sales were below seasonal norms during the fourth quarter, the Company’s operating results could be adversely affected. Quarterly sales can also be affected by the timing of new product releases, new store openings, store closings and the performance of existing stores.

XML

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012	Aug. 03, 2013	Jul. 28, 2012
Net sales	$ 80,768	$ 91,038	$ 174,702	$ 203,325
Cost of sales	48,754	55,220	106,899	125,692
Gross profit	32,014	35,818	67,803	77,633
Selling, general and administrative expenses	34,018	37,135	67,677	75,337
Income (loss) from operations	(2,004)	(1,317)	126	2,296
Interest expense, net	487	522	970	1,292
Income (loss) before income tax expense	(2,491)	(1,839)	(844)	1,004
Income tax expense	48	47	96	94
Net income (loss)	$ (2,539)	$ (1,886)	$ (940)	$ 910
BASIC AND DILUTED INCOME (LOSS) PER SHARE:
Basic income (loss) per share (in Dollars per share)	$ (0.08)	$ (0.06)	$ (0.03)	$ 0.03
Weighted average number of common shares outstanding – basic (in Shares)	33,147	31,537	32,717	31,537
Diluted income (loss) per share (in Dollars per share)	$ (0.08)	$ (0.06)	$ (0.03)	$ 0.03
Weighted average number of common shares outstanding – diluted (in Shares)	33,147	31,537	32,717	31,643

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Stock Based Compensation

6 Months Ended

Aug. 03, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

Note 4. Stock Based Compensation

Total stock-based compensation expense recognized in the condensed consolidated statements of operations for the twenty-six weeks ended August 3, 2013 and July 28, 2012 was approximately $73,000 and $60,000, respectively, before income taxes. 0 deferred tax benefit was recorded against stock-based compensation expense for the twenty-six weeks ended August 3, 2013 and July 28, 2012.

As of August 3, 2013, there was approximately $1.0 million of unrecognized compensation cost related to stock award awards that is expected to be recognized as expense over a weighted average period of 1.9 years.

As of August 3, 2013, stock awards authorized for issuance under the Company’s plans total 20.6 million. There are certain authorized stock awards for which the Company no longer grants awards. Of these awards authorized for issuance, 3.3 million were granted and are outstanding, 2.5 million of which were vested and exercisable. Awards available for future grants at August 3, 2013 were 2.4 million.

The table below outlines the assumptions that the Company used to estimate the fair value of stock based awards granted during the twenty-six weeks ended August 3, 2013:

	Minimum		Maximum
Dividend yield		0%
Expected stock price volatility	71.6%	-	75.2%
Risk-free interest rate		0.8%
Expected award life (in years)	4.9	-	5.7
Weighted average fair value per share of awards granted during the period		$2.93

The following table summarizes stock award activity during the twenty-six weeks ended August 3, 2013:

	Employee and Director Stock Award Plans
	Number of Shares Subject To Option			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Other Share Awards(1)		Weighted Average Grant Date Fair Value
Balance February 2, 2013		4,663,909		$	6.45		2.7		93,037	$	6.04
Granted		270,000			4.74		9.9		—		—
Exercised		(1,427,450	)		3.35		—		—		—
Forfeited		(10,000	)		1.79		—		—		—
Canceled		(242,409	)		8.46		—		—		—
Balance August 3, 2013		3,254,050		$	7.54		3.9		93,037	$	6.04
Exercisable August 3, 2013		2,365,300		$	9.23		2.2		93,037	$	6.04

(1) Other Share Awards include deferred shares granted to Directors and restricted stock units issued to employees.

As of August 3, 2013, the intrinsic value of stock awards outstanding was $2.3 million and exercisable was $0.4 million.

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Recently Adopted Accounting Pronouncements (Details) (Accounting Standards Update 2013-02 [Member])	6 Months Ended
	Aug. 03, 2013
Accounting Standards Update 2013-02 [Member]
Recently Adopted Accounting Pronouncements (Details) [Line Items]
New Accounting Pronouncement or Change in Accounting Principle, Description	In February 2013, the Financial Accounting Standards Board issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which adds additional disclosure requirements relating to the reclassification of items out of accumulated other comprehensive income. This ASU was effective for the first quarter of 2013 for the Company. The adoption of this guidance does not have a significant impact on the Company's condensed consolidated financial statements.

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Stock Based Compensation (Tables)

6 Months Ended

Aug. 03, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

The table below outlines the assumptions that the Company used to estimate the fair value of stock based awards granted during the twenty-six weeks ended August 3, 2013:

	Minimum		Maximum
Dividend yield		0%
Expected stock price volatility	71.6%	-	75.2%
Risk-free interest rate		0.8%
Expected award life (in years)	4.9	-	5.7
Weighted average fair value per share of awards granted during the period		$2.93

Disclosure of Share-based Compensation Arrangements by Share-based Payment Award [Table Text Block]

The following table summarizes stock award activity during the twenty-six weeks ended August 3, 2013:

	Employee and Director Stock Award Plans
	Number of Shares Subject To Option			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term		Other Share Awards(1)		Weighted Average Grant Date Fair Value
Balance February 2, 2013		4,663,909		$	6.45		2.7		93,037	$	6.04
Granted		270,000			4.74		9.9		—		—
Exercised		(1,427,450	)		3.35		—		—		—
Forfeited		(10,000	)		1.79		—		—		—
Canceled		(242,409	)		8.46		—		—		—
Balance August 3, 2013		3,254,050		$	7.54		3.9		93,037	$	6.04
Exercisable August 3, 2013		2,365,300		$	9.23		2.2		93,037	$	6.04

(1) Other Share Awards include deferred shares granted to Directors and restricted stock units issued to employees.

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Stock Based Compensation (Details) - Schedule of Disclosure of Share-based Compensation Arrangements by Share-based Payment Award (USD $)	6 Months Ended
	Aug. 03, 2013
Schedule of Disclosure of Share-based Compensation Arrangements by Share-based Payment Award [Abstract]
Balance February 2, 2013	4,663,909
Balance February 2, 2013 (in Dollars per share)	$ 6.45
Balance February 2, 2013	2.7
Balance February 2, 2013	93,037	[1]
Balance February 2, 2013 (in Dollars per share)	$ 6.04
Granted	270,000
Granted (in Dollars per share)	$ 4.74
Granted	9.9
Exercised	(1,427,450)
Exercised (in Dollars per share)	$ 3.35
Forfeited	(10,000)
Forfeited (in Dollars per share)	$ 1.79
Canceled	(242,409)
Canceled (in Dollars per share)	$ 8.46
Balance August 3, 2013	3,254,050
Balance August 3, 2013 (in Dollars per share)	$ 7.54
Balance August 3, 2013	3.9
Balance August 3, 2013	93,037	[1]
Balance August 3, 2013 (in Dollars per share)	$ 6.04
Exercisable August 3, 2013	2,365,300
Exercisable August 3, 2013 (in Dollars per share)	$ 9.23
Exercisable August 3, 2013	2.2
Exercisable August 3, 2013	93,037	[1]
Exercisable August 3, 2013 (in Dollars per share)	$ 6.04

[1] Other Share Awards include deferred shares granted to Directors and restricted stock units issued to employees.

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Stock Based Compensation (Details) - Schedule for estimation of fair value for the stock based awards granted (USD $)	6 Months Ended
	Aug. 03, 2013
Stock Based Compensation (Details) - Schedule for estimation of fair value for the stock based awards granted [Line Items]
Dividend yield	0.00%
Risk-free interest rate	0.80%
Weighted average fair value per share of awards granted during the period (in Dollars per share)	$ 2.93
Minimum [Member]
Stock Based Compensation (Details) - Schedule for estimation of fair value for the stock based awards granted [Line Items]
Expected stock price volatility	71.60%
Expected award life (in years)	4 years 328 days
Maximum [Member]
Stock Based Compensation (Details) - Schedule for estimation of fair value for the stock based awards granted [Line Items]
Expected stock price volatility	75.20%
Expected award life (in years)	5 years 255 days

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Shareholders' Equity (Details) (USD $)	1 Months Ended				6 Months Ended
	Aug. 31, 2013	Aug. 03, 2013	Feb. 02, 2013	Jul. 28, 2012	Aug. 03, 2013 Common Stock [Member]
Shareholders' Equity (Details) [Line Items]
Treasury Stock, Shares (in Shares)		25,520,605	25,102,990	25,102,990	418,000
Treasury Stock Acquired, Average Cost Per Share (in Dollars per share)					$ 5.10
Treasury Stock, Value		$ 220,308,000	$ 217,555,000	$ 217,555,000	$ 2,800,000
Stock Repurchase Program, Authorized Amount	$ 22,000,000

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Depreciation and Amortization of Fixed Assets (Details) - Schedule of Depreciation and Amortization of Fixed Assets (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012	Aug. 03, 2013	Jul. 28, 2012
Schedule of Depreciation and Amortization of Fixed Assets [Abstract]
Cost of sales	$ 120	$ 124	$ 244	$ 250
Selling, general and administrative expenses	861	885	1,685	1,826
Total	$ 981	$ 1,009	$ 1,929	$ 2,076

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Stock Based Compensation (Details) (USD $) Share data in Millions, unless otherwise specified	6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Allocated Share-based Compensation Expense	$ 73,000	$ 60,000
Deferred Tax Assets, Tax Deferred Expense, Compensation and Benefits	0	0
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized	1,000,000
Employee Service Share-based Compensation, Nonvested Awards, Compensation Cost Not yet Recognized, Period for Recognition	1 year 328 days
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized (in Shares)	20.6
Share Based Compensation Arrangement By Share Based Payment Award Options And Other Than Options Outstanding Number (in Shares)	3.3
Share Based Compensation Arrangement By Share Based Payment Award Options And Other Than Options Vested And Expected To Vest Exercisable Number (in Shares)	2.5
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant (in Shares)	2.4
Intrinsic Value of Stock Awards Outstanding	2,300,000
Intrinsic Value of Stock Awards Exercisable	$ 400,000

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012
Net cash used by operating activities	$ (34,628)	$ (27,169)
Cash flows from investing activities:
Purchases of fixed assets	(4,682)	(948)
Net cash used by investing activities	(4,682)	(948)
Cash flows from financing activities:
Payments of long-term debt		(1,748)
Payments of capital lease obligations	(453)	(398)
Exercise of stock options	4,786
Purchase of treasury stock	(2,753)
Net cash provided (used) by financing activities	1,580	(2,146)
Net decrease in cash and cash equivalents	(37,730)	(30,263)
Cash and cash equivalents, beginning of period	132,982	88,515
Cash and cash equivalents, end of period	95,252	58,252
Issuance of shares under deferred share plan	$ 50

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Basis of Presentation

6 Months Ended

Aug. 03, 2013

Disclosure Text Block [Abstract]

Basis of Accounting [Text Block]

Note 2: Basis of Presentation

The accompanying unaudited condensed consolidated financial statements consist of Trans World Entertainment Corporation, its wholly-owned subsidiary, Record Town, Inc. (“Record Town”), and Record Town’s subsidiaries, all of which are wholly-owned. All significant intercompany accounts and transactions have been eliminated.

The interim condensed consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. The information furnished in these unaudited condensed consolidated financial statements reflects all normal, recurring adjustments which, in the opinion of management, are necessary for the fair presentation of such financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. During the twenty-six weeks ended August 3, 2013, the Company recorded a prior period adjustment to the value of its inventory, which increased cost of sales and decreased gross margin by approximately $0.3 million. The cumulative effect of this adjustment is deemed immaterial. Certain information and footnote disclosures normally included in the financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted pursuant to rules and regulations applicable to interim financial statements. Certain prior period amounts have been reclassified to conform to the current presentation.

The information presented in the accompanying unaudited condensed consolidated balance sheet as of February 2, 2013 has been derived from the Company’s February 2, 2013 audited consolidated financial statements. All other information has been derived from the Company’s unaudited condensed consolidated financial statements as of and for the thirteen and twenty-six weeks ended August 3, 2013 and July 28, 2012. These unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 2, 2013.

The Company’s significant accounting policies are the same as those described in Note 1 to the Company’s Consolidated Financial Statements on Form 10-K for the fiscal year ended February 2, 2013.

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Defined Benefit Plans

6 Months Ended

Aug. 03, 2013

Disclosure Text Block Supplement [Abstract]

Compensation and Employee Benefit Plans [Text Block]

Note 5. Defined Benefit Plans

The Company maintains a non-qualified Supplemental Executive Retirement Plan (“SERP”) for certain executive officers of the Company. The SERP provides eligible executives defined pension benefits that supplement benefits under other retirement arrangements.

Prior to June 1, 2003, the Company had provided the Board of Directors with a noncontributory, unfunded retirement plan (“Director Retirement Plan”) that paid retired directors an annual retirement benefit. Directors who were not yet vested in their retirement benefits as of June 1, 2003 had the present value of benefits already accrued as of the effective date converted to deferred shares of the Company’s Common Stock. Directors that were fully or partially vested in their retirement benefits were given a one-time election to continue to participate in the current retirement program or convert the present value of their benefits to deferred shares.

The measurement date for the SERP and Director Retirement Plan is fiscal year end, using actuarial techniques which reflect estimates for mortality, turnover and expected retirement. In addition, management makes assumptions concerning future salary increases. Discount rates are generally established as of the measurement date using theoretical bond models that select high-grade corporate bonds with maturities or coupons that correlate to the expected payouts of the applicable liabilities.

The following represents the components of the net periodic pension cost related to the Company’s SERP and Director Retirement Plan for the respective periods:  

	Thirteen weeks ended					Twenty-six weeks ended
	August 3, 2013			July 28, 2012		August 3, 2013			July 28, 2012
	(in thousands)					(in thousands)
Service cost	$	28		$	22	$	56		$	44
Interest cost		164			159		328			318
Amortization of prior service cost		180			86		360			172
Amortization of net gain		(1	)		—		(2	)		—
Net periodic pension cost	$	371		$	267	$	742		$	534

During the twenty-six weeks ended August 3, 2013, the Company did not make any cash contributions to the SERP or the Director Retirement Plan, and presently expects to pay approximately $103,000 in benefits relating to the SERP and $49,000 in benefits relating to the Director Retirement Plan during Fiscal 2013.

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Recently Adopted Accounting Pronouncements

6 Months Ended

Aug. 03, 2013

Accounting Changes and Error Corrections [Abstract]

Accounting Changes and Error Corrections [Text Block]

Note 3. Recently Adopted Accounting Pronouncements

In February 2013, the Financial Accounting Standards Board issued ASU No. 2013-02, Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income, which adds additional disclosure requirements relating to the reclassification of items out of accumulated other comprehensive income.  This ASU was effective for the first quarter of 2013 for the Company. The adoption of this guidance does not have a significant impact on the Company’s condensed consolidated financial statements.

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Defined Benefit Plans (Details) (USD $)	Aug. 03, 2013
Supplemental Employee Retirement Plan, Defined Benefit [Member]
Defined Benefit Plans (Details) [Line Items]
Defined Benefit Plan, Expected Future Benefit Payments, Next Twelve Months	$ 103,000
Director Retirement Plan [Member]
Defined Benefit Plans (Details) [Line Items]
Defined Benefit Plan, Expected Future Benefit Payments, Next Twelve Months	$ 49,000

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Income (Loss) Per Share (Details) In Millions, unless otherwise specified	6 Months Ended
	Jul. 28, 2012
Earnings Per Share [Abstract]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	4.4

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CONDENSED CONSOLIDATED BALANCE SHEETS (Parentheticals) (USD $)	Aug. 03, 2013	Feb. 02, 2013	Jul. 28, 2012
Preferred stock par value (in Dollars per share)	$ 0.01	$ 0.01	$ 0.01
Preferred stock, shares authorized	5,000,000	5,000,000	5,000,000
Preferred stock, shares issued	0	0	0
Common stock par value (in Dollars per share)	$ 0.01	$ 0.01	$ 0.01
Common stock, shares authorized	200,000,000	200,000,000	200,000,000
Common stock, shares issued	58,166,572	56,728,146	56,557,994
Treasury stock, shares at cost	25,520,605	25,102,990	25,102,990

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Depreciation and Amortization of Fixed Assets

6 Months Ended

Aug. 03, 2013

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment Disclosure [Text Block]

Note 8. Depreciation and Amortization of Fixed Assets

Depreciation and amortization of fixed assets included in the condensed consolidated statements of operations is as follows:

	Thirteen Weeks Ended				Twenty-six Weeks Ended
	August 3, 2013		July 28, 2012		August 3, 2013		July 28, 2012
	(in thousands)				(in thousands)
Cost of sales	$	120	$	124	$	244	$	250
Selling, general and administrative expenses		861		885		1,685		1,826
Total	$	981	$	1,009	$	1,929	$	2,076

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012	Aug. 03, 2013	Jul. 28, 2012
Net income (loss)	$ (2,539)	$ (1,886)	$ (940)	$ 910
Amortization of prior service cost	179	86	358	172
Comprehensive income (loss)	$ (2,360)	$ (1,800)	$ (582)	$ 1,082

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CONDENSED CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Aug. 03, 2013	Feb. 02, 2013	Jul. 28, 2012
CURRENT ASSETS:
Cash and cash equivalents	$ 95,252	$ 132,982	$ 58,252
Merchandise inventory	151,451	155,429	161,972
Other current assets	11,611	9,365	7,737
Total current assets	258,314	297,776	227,961
NET FIXED ASSETS	11,654	9,057	15,368
OTHER ASSETS	8,794	8,407	8,402
TOTAL ASSETS	278,762	315,240	251,731
CURRENT LIABILITIES:
Accounts payable	50,309	79,438	41,496
Accrued expenses and other current liabilities	8,936	10,122	10,616
Accrued incentives	85	7,667	137
Deferred revenue	10,094	10,464	10,391
Current portion of capital lease obligations	999	936	878
Total current liabilities	70,423	108,627	63,518
CAPITAL LEASE OBLIGATIONS, less current portion	1,488	2,004	2,488
OTHER LONG-TERM LIABILITIES	24,468	23,849	22,840
TOTAL LIABILITIES	96,379	134,480	88,846
SHAREHOLDERS’ EQUITY
Preferred stock ($0.01 par value; 5,000,000 shares authorized; none issued)
Common stock ($0.01 par value; 200,000,000 shares authorized; 58,166,572, 56,728,146 and 56,557,994 shares issued, respectively)	582	567	566
Additional paid-in capital	314,394	309,451	308,920
Treasury stock at cost (25,520,605, 25,102,990 and 25,102,990 shares, respectively)	(220,308)	(217,555)	(217,555)
Accumulated other comprehensive loss	(2,416)	(2,774)	(2,157)
Retained earnings	90,131	91,071	73,111
TOTAL SHAREHOLDERS’ EQUITY	182,383	180,760	162,885
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$ 278,762	$ 315,240	$ 251,731

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Defined Benefit Plans (Details) - Schedule Components of Net Periodic Benefit Cost and Other Comprehensive Income Loss (USD $) In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012	Aug. 03, 2013	Jul. 28, 2012
Schedule Components of Net Periodic Benefit Cost and Other Comprehensive Income Loss [Abstract]
Service cost	$ 28	$ 22	$ 56	$ 44
Interest cost	164	159	328	318
Amortization of prior service cost	180	86	360	172
Amortization of net gain	(1)		(2)
Net periodic pension cost	$ 371	$ 267	$ 742	$ 534

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Basis of Presentation (Details) (USD $) In Millions, unless otherwise specified	6 Months Ended
	Aug. 03, 2013
Disclosure Text Block [Abstract]
Prior Period Adjustment Related to Inventory	$ 0.3

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Accumulated Other Comprehensive Income (Loss)

6 Months Ended

Aug. 03, 2013

Disclosure Text Block [Abstract]

Comprehensive Income (Loss) Note [Text Block]

Note 7. Accumulated Other Comprehensive Income (Loss)

Accumulated other comprehensive income (loss) that the Company reports in the condensed consolidated balance sheets represents the excess of accrued pension liability over accrued benefit cost, net of taxes, associated with the Company’s defined benefit plans. Comprehensive income or loss consists of net income or loss and the reclassification of prior service costs previously reported in comprehensive income (loss) for the thirteen and twenty-six weeks ended August 3, 2013 and July 28, 2012. Amortization of prior service cost is recorded under selling, general and administrative expenses in the condensed consolidated statements of operations.

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Line of Credit (Details) (USD $) In Millions, unless otherwise specified				6 Months Ended					6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012	Apr. 30, 2010	Aug. 03, 2013 LIBOR Rate [Member] Minimum [Member] Second Amended Credit Facility [Member]	Aug. 03, 2013 LIBOR Rate [Member] Maximum [Member] Second Amended Credit Facility [Member]	Aug. 03, 2013 Base Rate [Member] Minimum [Member] Second Amended Credit Facility [Member]	Aug. 03, 2013 Base Rate [Member] Maximum [Member] Second Amended Credit Facility [Member]	May 31, 2012 Second Amended Credit Facility [Member]	Aug. 03, 2013 Minimum [Member] Second Amended Credit Facility [Member]	Aug. 03, 2013 Maximum [Member] Second Amended Credit Facility [Member]
Line of Credit (Details) [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity (in Dollars)			$ 100					$ 75
Debt Instrument, Basis Spread on Variable Rate				2.25%	2.75%	0.75%	1.25%
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage									0.375%	0.50%
Line of Credit Facility, Capacity Available for Trade Purchases (in Dollars)	51.1
Letters of Credit Outstanding, Amount (in Dollars)	$ 0.1	$ 0.7

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Shareholders' Equity

6 Months Ended

Aug. 03, 2013

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

Note 10. Shareholders’ Equity

As of August 3, 2013, the Company repurchased approximately 418,000 shares of common stock at an average price of $5.10 per share, for an aggregate purchase price of $2.8 million, including direct fees related to the purchase of shares. The Company repurchased these shares via a tender offer in accordance with the stock repurchase program approved by the Board of Directors utilizing cash on hand. The Company classified the repurchased shares as treasury stock on the Company’s balance sheet.

On August 22, 2013, the Company’s Board of Directors approved a program to repurchase up to $22 million of the Company’s outstanding common stock. Under the repurchase program, the Company has the authority to repurchase shares in the open market, or through negotiated transactions from time to time. The amount and timing of any purchases will depend upon market and business conditions, including the price and availability of the Company’s shares, trading volume and the attractiveness of business opportunities amongst other things. The repurchased shares are expected to remain in treasury.

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Line of Credit

6 Months Ended

Aug. 03, 2013

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

Note 6. Line of Credit

In May 2012, the Company entered into a $75 million credit facility (“Second Amended Credit Facility”) which amended its previous $100 million credit facility (“Amended Credit Facility”). The principal amount of all outstanding loans under the Second Amended Credit Facility together with any accrued but unpaid interest, are due and payable in May 2017, unless otherwise paid earlier pursuant to the terms of the Second Amended Credit Facility. Payments of amounts due under the Second Amended Credit Facility are secured by the assets of the Company.

The Second Amended Credit Facility includes customary provisions, including affirmative and negative covenants, which include representations, warranties and restrictions on additional indebtedness and acquisitions. The Second Amended Credit Facility also includes customary events of default, including, among other things, material adverse effect, bankruptcy, and certain changes of control. The Second Amended Credit Facility also contains other terms and conditions, including covenants around the number of store closings and allows for the payment of dividends with certain restrictions. It also changed the formula for interest rates. The Company is compliant with all covenants.

Interest under the Second Amended Credit Facility will accrue, at the election of the Company, at a Base Rate or LIBO Rate, plus, in each case, an Applicable Margin, which is determined by reference to the level of availability as defined in the Credit Agreement, with the Applicable Margin for LIBO Rate loans ranging from 2.25% to 2.75% and the Applicable Margin for Prime Rate loans ranging from 0.75% to 1.25%. In addition, a commitment fee ranging from 0.375% to 0.50% is also payable on unused commitments.

The availability under the Second Amended Credit Facility is subject to limitations based on sufficient inventory levels. Based on inventory levels at the end of the quarter, the availability under the Second Amended Credit Facility was $51.1 million as of August 3, 2013. As of August 3, 2013, the Company did not have any borrowings outstanding under the Second Amended Credit Facility and had $0.1 million in outstanding letter of credit obligations. The Company did not have any borrowings during the first half of Fiscal 2013.

As of July 28, 2012, the Company did not have any borrowings outstanding under the Amended Credit Facility and had $0.7 million in outstanding letter of credit obligations. The Company did not have any borrowings during the first half of Fiscal 2012.

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Nature of Operations

6 Months Ended

Aug. 03, 2013

Disclosure Text Block [Abstract]

Nature of Operations [Text Block]

Note 1. Nature of Operations

Trans World Entertainment Corporation and subsidiaries (“the Company”) is one of the largest specialty retailers of entertainment products, including video, music, electronics, trend, video games and related products in the United States. The Company operates a chain of retail entertainment stores, primarily under the names f.y.e. for your entertainment and Suncoast Motion Pictures, and e-commerce sites, www.fye.com, www.wherehouse.com, and www.secondspin.com in a single industry segment. As of August 3, 2013, the Company operated 355 stores totaling approximately 2.1 million square feet in the United States, the District of Columbia and the Commonwealth of Puerto Rico.

Liquidity and Cash Flows:

The Company’s primary sources of working capital are cash and cash equivalents on hand, cash provided by operations and borrowing capacity under its revolving credit facility (See Note 6 for further details). The Company’s cash flows fluctuate from quarter to quarter due to various items, including seasonality of sales and earnings, merchandise inventory purchases and returns and the related terms on the purchases and capital expenditures. Management believes it will have adequate resources to fund its cash needs for the next twelve months and beyond, including its capital spending, its seasonal increase in merchandise inventory and other operating cash requirements and commitments. During Fiscal 2012, management carried out certain strategic initiatives in its efforts to reduce certain operating costs. In addition, management closed 33 stores and plans to continue its evaluation of profitability of the Company’s stores in consideration of lease terms, conditions and expirations, including considering new and relocated stores. Management has continued many of the initiatives begun in 2012 as part of the execution of its operating plan for 2013, including a focus on improved product selection based on customer preferences and industry changes, as well as further streamlining of its operations. The Company opened 9 stores and closed 12 stores during the twenty-six weeks ended August 3, 2013.

Based on the Company’s current cash position, the Board of Directors approved a stock repurchase plan (See Note 10 for further details).

Seasonality:

The Company’s business is seasonal, with the fourth fiscal quarter constituting the Company’s peak selling period. In fiscal 2012, the fourth quarter accounted for approximately 36% of annual net sales. The fourth quarter of fiscal 2012 consisted of 14 weeks. In anticipation of increased sales activity in the fourth quarter, the Company purchases additional inventory and hires seasonal associates to supplement its core store sales and distribution center staff. If, for any reason, the Company’s sales were below seasonal norms during the fourth quarter, the Company’s operating results could be adversely affected. Quarterly sales can also be affected by the timing of new product releases, new store openings, store closings and the performance of existing stores.

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Income (Loss) Per Share (Details) - Schedule of Weighted Average Number of Shares In Thousands, unless otherwise specified	3 Months Ended		6 Months Ended
	Aug. 03, 2013	Jul. 28, 2012	Aug. 03, 2013	Jul. 28, 2012
Schedule of Weighted Average Number of Shares [Abstract]
Weighted average common shares outstanding – basic	33,147	31,537	32,717	31,537
Dilutive effect of employee stock options				106
Weighted average common shares outstanding–diluted	33,147	31,537	32,717	31,643

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Defined Benefit Plans (Tables)

6 Months Ended

Aug. 03, 2013

Disclosure Text Block Supplement [Abstract]

Schedule of Net Benefit Costs [Table Text Block]

The following represents the components of the net periodic pension cost related to the Company’s SERP and Director Retirement Plan for the respective periods:

	Thirteen weeks ended					Twenty-six weeks ended
	August 3, 2013			July 28, 2012		August 3, 2013			July 28, 2012
	(in thousands)					(in thousands)
Service cost	$	28		$	22	$	56		$	44
Interest cost		164			159		328			318
Amortization of prior service cost		180			86		360			172
Amortization of net gain		(1	)		—		(2	)		—
Net periodic pension cost	$	371		$	267	$	742		$	534

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Income (Loss) Per Share

6 Months Ended

Aug. 03, 2013

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

Note 9. Income (Loss) Per Share

Basic income (loss) per share is calculated by dividing net income (loss) by the weighted average common shares outstanding for the period. Diluted income per share reflects the potential dilution that could occur if securities or other contracts to issue common stock were exercised or converted into common stock or resulted in the issuance of common stock (net of any assumed repurchases) that then shared in the earnings of the Company, if any. It is computed by dividing net income (loss) by the sum of the weighted average shares outstanding and additional common shares that would have been outstanding if the dilutive potential common shares had been issued for the Company’s common stock awards from the Company’s Stock Award Plans.

Weighted average shares are calculated as follows:

	Thirteen weeks ended				Twenty-six weeks ended
	August 3, 2013		July 28, 2012		August 3, 2013		July 28, 2012
	(in thousands)				(in thousands)
Weighted average common shares outstanding – basic		33,147		31,537		32,717		31,537
Dilutive effect of employee stock options		—		—		—		106
Weighted average common shares outstanding–diluted		33,147		31,537		32,717		31,643

For the thirteen and twenty-six week periods ended August 3, 2013 and the thirteen week period ended July 28, 2012, the impact of all outstanding stock awards was not considered because the Company reported a net loss and such impact would be anti-dilutive. Accordingly, basic and diluted loss per share is the same. For the twenty-six week period ended July 28, 2012, the impact of 4.4 million outstanding stock awards was not considered because such impact would be anti-dilutive.

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Nature of Operations (Details)	3 Months Ended	6 Months Ended	12 Months Ended
	Feb. 02, 2013	Aug. 03, 2013 sqft	Feb. 02, 2013
Disclosure Text Block [Abstract]
Number of Stores		355
Area of Stores (in Square Feet)		2,100,000
Number of Stores Closed		12	33
Number of Stores Opened		9
Percentage of Annual Net Sales Recorded in the Fourth Quarter	36.00%

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Depreciation and Amortization of Fixed Assets (Tables)

6 Months Ended

Aug. 03, 2013

Property, Plant and Equipment [Abstract]

Schedule of Depreciation and Amortization of Fixed Assets [Table Text Block]

Depreciation and amortization of fixed assets included in the condensed consolidated statements of operations is as follows:

	Thirteen Weeks Ended				Twenty-six Weeks Ended
	August 3, 2013		July 28, 2012		August 3, 2013		July 28, 2012
	(in thousands)				(in thousands)
Cost of sales	$	120	$	124	$	244	$	250
Selling, general and administrative expenses		861		885		1,685		1,826
Total	$	981	$	1,009	$	1,929	$	2,076

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Document And Entity Information	6 Months Ended
	Aug. 03, 2013
Document and Entity Information [Abstract]
Entity Registrant Name	TRANS WORLD ENTERTAINMENT CORP
Document Type	10-Q
Current Fiscal Year End Date	--02-01
Entity Common Stock, Shares Outstanding	33,147,441
Amendment Flag	false
Entity Central Index Key	0000795212
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Smaller Reporting Company
Entity Well-known Seasoned Issuer	No
Document Period End Date	Aug. 03, 2013
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q2

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Income (Loss) Per Share (Tables)

6 Months Ended

Aug. 03, 2013

Earnings Per Share [Abstract]

Schedule of Weighted Average Number of Shares [Table Text Block]

Weighted average shares are calculated as follows:

	Thirteen weeks ended				Twenty-six weeks ended
	August 3, 2013		July 28, 2012		August 3, 2013		July 28, 2012
	(in thousands)				(in thousands)
Weighted average common shares outstanding – basic		33,147		31,537		32,717		31,537
Dilutive effect of employee stock options		—		—		—		106
Weighted average common shares outstanding–diluted		33,147		31,537		32,717		31,643