Dairy Mart announces fiscal 1997 fourth-quarter and full-year financial results; Meets strategic objectives.

CUYAHOGA FALLS, Ohio--(BUSINESS WIRE)--April 30, 1997--Dairy Mart Convenience Stores Inc. (Amex: DMC.A & DMC.B) announced financial results for its fiscal 1997 fourth quarter and fiscal year, which ended Feb. 1, 1997.

For the fiscal year, the company reported a net loss of $1.9 million, or $0.42 per share, as compared to a net loss of $6.0 million, or $1.12 per share, in the prior fiscal year. Fiscal 1997's fourth-quarter net loss was $3.9 million, or $0.85 per share, which compares with a net loss of $7.5 million, or $1.57 per share, in the fourth quarter of the prior year.

Revenues for the 1997 fiscal year were $585.7 million as compared to $571.3 million in the prior fiscal year. Fiscal 1997's revenues were generated by an average of 841 convenience stores, 367 of which sold gasoline. The prior-year revenues were generated by an average of 918 convenience stores, 376 of which sold gasoline. The number of retail locations was lower this year because the company has been closing or selling stores whose performance has been substandard.

"Fiscal 1997 was a huge success in terms of accomplishing a number of key steps in our strategic plan," said Robert B. Stein, Jr., the company's chairman, chief executive officer and president. "The company achieved the largest year-to-year comparable stores sales increase in its history while also fine-tuning its gross profit margins to produce higher total gross profit dollars, closed a number of substandard locations, moved corporate headquarters to the Midwest in order to focus on its core markets and made various infrastructural improvements to allow it to better execute its business plan. Subsequent to year-end, it entered into agreements to sell various assets in order to strategically redeploy capital for the purpose of accelerating new store development. Although our progress was not reflected in the bottom line, the steps we took were necessary to position ourselves for profitability in fiscal 1998 and establish a trend of profitable growth into the next century.

"To this end, further details of the major objectives that were accomplished in fiscal 1997 are as follows: First, Dairy Mart had to adjust its retail pricing strategy to be more competitive in order to attract new and permanent customers. We believe our strategic adjustments worked, because fiscal 1997's comparable store sales increased by three percent. Our short-term profitability was negatively affected by this longer-term decision, since we had to lower our prices at a time when certain store operating costs, specifically labor, were escalating. The cost of store labor increased because of a change in the minimum wage last fall as well as generally tight labor market. This combination of pricing adjustments and escalating operating costs caused a decrease in profitability of approximately $2.6 million in fiscal 1997's fourth quarter and $4.5 million for the entire fiscal year. The long-term objective is starting to be realized as the trend of increased comparable store sales continues into the first quarter of fiscal 1998 and the competitive environment is allowing us to expand our margins through price increases on select products. The company now has a sales and product margin mix that is producing higher total gross profit dollars while still attracting new customers.

"Second, we continued to weed-out underperforming locations, at a cost of $2.7 million for the year. These stores, which generally did not sell gasoline and for the most part were not located on prime real-estate locations, no longer met our strategic objectives for long-term growth and profitability.

"Third, we forged agreements to sell the company's 161 convenience stores in the northeast, its former headquarters facility in Connecticut, and its former office and manufacturing facility in Ohio. These asset sales are strategic redeployments of capital for the purpose of accelerating our plan to improve the overall quality of our store facilities.

"Fourth, we invested $1.2 million to move our corporate headquarters to the Midwest. The Midwest holds Dairy Mart's strongest concentration of stores and is, therefore, our core strategic market for future growth.

"Finally, we improved the quality of our infrastructure in order to better execute our strategic plan. We supplemented the ranks of senior management with new and diverse experience, and the company entered into a relationship with Trammell-Crow, the nation's leading commercial real estate firm. Additionally, we restructured the organization to centralize support functions, which resulted in a reduced layer of management in store operations. These infrastructural improvements, along with the capital redeployment mentioned above, allowed the company to define a bold new look and logo for its stores and increased significantly the number of new stores we can open over the next few years.

"We expect that the investments we continue to make for the long-term benefit of the company will begin to reap benefits in fiscal 1998 through the accelerated development of new stores and the remodeling of our older stores, through the improved sales and margin mix I mentioned above and through continued aggressive cost cutting," Stein concluded.

This press release contains forward-looking statements, as defined in Section 21E of the Securities Exchange Act of 1934, that are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected in such statements. Such risks and uncertainties include, but are not limited to, severe weather, product demand and market acceptance risks, the effect of economic conditions, the impact of competition, and other risks detailed in the company's Securities and Exchange Commission filings.

Dairy Mart, which has its headquarters in Cuyahoga Falls, Ohio, owns, operates and franchises 811 retail convenience stores in 11 states, 361 of which also sell gasoline. -0-

        DAIRY MART CONVENIENCE STORES INC. AND SUBSIDIARIES
               Consolidated Statements of Operations
                           (Unaudited)
             (in thousands, except per share amounts)

                      For the fourth fiscal       For the fiscal
                          quarter ended             year ended

                        Feb. 1,    Feb. 3,        Feb. 1,   Feb. 3,
                         1997       1996           1997      1996

Revenues              $ 140,942  $ 143,117     $ 585,746  $ 571,311

Cost of goods sold and
 expenses:
 Cost of goods sold     105,959    103,899       431,851    413,548
 Operating and
  administrative
  expenses               38,307     48,493       145,631    157,322
 Interest expense         2,690      2,679        10,877      9,661
                        146,956    155,071       588,359    580,531

 Loss before income
  taxes                  (6,014)   (11,954)       (2,613)    (9,220)

Benefit from income
 taxes                    2,094      4,451           727      3,220

 Net loss             $  (3,920) $  (7,503)    $  (1,886) $  (6,000)

Weighted average number
 of shares                4,612      4,772         4,441      5,374

Loss per share        $   (0.85) $   (1.57)    $   (0.42) $   (1.12)

-0-

                         AMEX TRADING SYMBOLS
                      CLASS A COMMON STOCK - DMC.A
                      CLASS B COMMON STOCK - DMC.B

CONTACT: Dairy Mart

Gregory G. Landry

[phone]