Dairy Mart Reports First Quarter Results.

Business Editors

HUDSON, Ohio--(BUSINESS WIRE)--June 19, 2001

Dairy Mart Convenience Stores, Inc. (AMEX:DMC) today announced operating results for the fiscal first quarter ended May 5, 2001.

Revenues for the quarter decreased 6.5% to $161.7 million compared to revenues of $172.9 million for the same period last year. Merchandise sales decreased $5.1 million, or 5.7%, primarily due to the sale or closing of 29 underperforming stores. Merchandise sales of company-operated stores open at least a year were flat due primarily to harsher than normal winter and spring weather and a general downturn in the U.S. economy. Gasoline revenues decreased $6.1 million, or 7.3% due to a decrease in the total gallons of gasoline sold partially offset by a 7.9 cents per gallon increase in the average selling price of gasoline. The decrease in gallons sold was attributable to the aforementioned weather and economic conditions and higher retail gasoline prices.

Net loss for the quarter was $7.7 million, or $1.55 per share, compared with a net loss of $2.9 million, or $0.59 per share, in the prior year. Included in the results of the current year quarter are $2.0 million of pre-tax expenses associated with severance and related costs in conjunction with a previously announced reduction in corporate headquarter positions, and expenses related to the previously announced acquisition of Dairy Mart by DM Acquisition Corp. Additionally, the Company did not record a tax benefit in the current-year first quarter due to the uncertainty as to its ability to utilize current operating losses to offset potential future income tax liabilities. The Company did, however, record a tax benefit of $2.5 million in the first quarter of the prior year. On an operating basis, earnings before interest, taxes, depreciation and amortization (EBITDA) for the 2002 first quarter were $2.3 million compared with $1.4 million in the prior year.

"Revenues declined as we continue to upgrade our store base by closing or selling low-volume, underperforming stores," said Robert B. Stein, Jr., Dairy Mart's Chairman, President and Chief Executive Officer. "Additionally cold and wet weather, a tough economy and the high price of gasoline also impacted revenues. However, I'm pleased that our previously announced business restructuring plan under which 30 executive, managerial and administrative positions were eliminated has begun to reap the expected benefits through lower general and administrative overhead costs. I am also personally pleased that the Company and DM Acquisition Corp. and its financing sources continue to work on all aspects of the previously announced proposed merger."

Dairy Mart owns or operates approximately 545 retail stores in seven states located in the Midwest and Southeast. For more information, visit Dairy Mart's web site at www.dairymart.com.

Any statements contained in this release that are not historical facts, including those relating to future operating results; a sale or closure of underperforming stores; a reduction in debt or overhead; and a possible sale of the Company, that may be considered forward-looking statements are subject to risks, uncertainties and other factors that could cause actual results to differ materially. Factors that could cause actual results to differ from those forward-looking statements include competition, general economic conditions, the ability to successfully operate the business with the recent reductions made to overhead, the ability to complete the financing contemplated by the merger and other factors discussed in periodic reports filed by the Company with the Securities and Exchange Commission.

(Table Follows)

         Dairy Mart Convenience Stores, Inc. and Subsidiaries
                 Consolidated Statements of Operations
                              (Unaudited)
               (in thousands, except per share amounts)

                                                FOR THE FIRST FISCAL
                                                   QUARTER ENDED
                                             ------------------------
                                              May 5,        April 29,
                                               2001           2000
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Revenues                                     $161,737       $172,934
Cost of goods sold and expenses:
 Cost of goods sold                           127,921        137,411
 Operating and administrative expenses         37,425         37,736
 Interest expense                               3,974          3,126
                                             --------       --------
                                              169,320        178,273
                                             --------       --------
Income (loss) before income taxes              (7,583)        (5,339)

Benefit from (provision for) income taxes        (150)         2,458
                                             --------       --------
 Net income (loss)                           $ (7,733)      $ (2,881)
                                             --------       --------
Earnings (loss) per share basic and diluted  $  (1.55)      $  (0.59)

Weighted average number of basic shares         5,003          4,896
Weighted average number of diluted shares       5,067          4,903
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AMEX TRADING SYMBOL - DMC