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To: GST who wrote (39990)	2/14/1999 2:31:00 PM
From: Glenn D. Rudolph	Respond to of 164684

Service Merchandise Co. Inc. February 9, 1999 SERVICE MERCHANDISE ANNOUNCES INTENTION TO CLOSE UP TO 134 STORES NASHVILLE, Tenn.--(BUSINESS WIRE)--Feb. 9, 1999--Service Merchandise Company, Inc. (NYSE: SME) today announced its intention to close up to 134 underperforming stores over the next three to four months. During that period, the Company plans to run inventory clearance sales at these locations. "This action is an important step in the Company's out-of-court restructuring," according to CEO Bettina M. Whyte. "These sales will serve to reduce bank debt and allow the Company to refocus its energies on its remaining 213 stores and on refining its niche in fine jewelry, gifts and home products," said Whyte. Over the next several months, SME intends to develop and implement a business plan intended to return the Company to financial health. In the course of this process, the Company will assess all of its operations and substantially reduce its cost structure. In an unrelated announcement, the Company also stated that Robert McDowell has resigned from its Board of Directors. SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 This press release includes certain forward-looking statements in reliance on the "safe harbor" provisions of The Private Securities Litigation Reform Act of 1995. Any such forward-looking statements are subject to a number of risks and uncertainties, including but not limited to the factors identified below. Actual results may differ materially from those anticipated in any such forward-looking statements. The Company undertakes no obligation to update or revise any such forward-looking statements. The Company's liquidity, capital resources, and results of operations may be affected from time to time by a number of factors and risks, including, but not limited to, the ability of the Company to comply with the terms of its credit facility; the ability of the Company to access borrowings under its credit facility; the ability of the Company to obtain shipments and negotiate terms with vendors and service providers for current orders and past due payables; the ability of the Company to negotiate terms with landlords with respect to stores to be closed and current and future lease obligations; the Company's use of substantial financial leverage and the potential impact of such leverage on the ability to conduct going out of business inventory sales to result in improved liquidity; the Company's ability to develop and execute operating strategies to withstand significant economic downturns and to repay its indebtedness; the ability to develop, fund and execute a new operating plan for the Company; the ability of the Company to attract and retain key executives and Associates; competitive pressures from other retailers, including specialty retailers and discount stores, which may effect the nature and viability of the Company's business strategy; trends in the economy as a whole, which may affect consumer confidence and consumer demand for the types of goods sold by the Company; availability, costs and terms of financing, including the risk of rising interest rates; the ability to maintain gross profit margins; the seasonal nature of the Company's business and the ability of the Company to predict consumer demand as a whole, as well as demand for specific goods; the ability of the Company to attract and retain customers; costs associated with the shipping, handling and control of inventory and the Company's ability to optimize its supply chain; potential adverse publicity; availability and cost of management and labor employed; real estate occupancy and development costs, including the substantial fixed investment costs associated with opening, maintaining or closing a Company store; the ability to liquidate unwanted inventory at existing or closed stores; and the ability to effect conversions to new technological systems, including becoming Year 2000 compliant. CONTACT: Service Merchandise Company Inc., Nashville Greg Winnett, 615/660-7092 or Kekst and Company, New York Jason Lynch, 212/521-4841