Orchard Supply Hardware Stores Corporation Provides Update on Efforts to Improve Its Capital Structure

  Orchard Supply Hardware Stores Corporation Provides Update on Efforts to
  Improve Its Capital Structure

Company Expands Asset-Based Credit Facility to $145 Million and Obtains Waiver
                            from Term Loan Holders

    Reports Preliminary Fourth Quarter and Fiscal Year 2012 Sales Results

                 Remains Committed to Repositioning Strategy

Business Wire

SAN JOSE, Calif. -- February 15, 2013

Orchard Supply Hardware Stores Corporation (Nasdaq:OSH), a neighborhood
hardware and garden store focused on paint, repair and the backyard, today
provided an update on the Company’s efforts to refinance or modify its Term
Loan debt and otherwise work to improve its capital structure. Additionally,
Orchard provided an update on select preliminary fourth quarter fiscal 2012
financial performance and reiterated the Company’s commitment to its
repositioning strategy, including opening new and renovating existing stores.
The Company’s updates include the following:

  * On February 11, 2013, we expanded our existing Senior Secured Credit
    Facility with Wells Fargo Capital Finance and Bank of America, N.A.,
    increasing total borrowing capacity to $145.0 million through the addition
    of a $17.5 million last-in-last-out supplemental term loan tranche.
  * As of February 12, 2013, we had cash and available credit of $40.0
    million, including $32.0 million available to borrow on the Senior Secured
    Credit Facility. This liquidity will be used for general working capital
    purposes, including paying vendors in the ordinary course of business as
    part of the Company’s customary spring inventory build-up.
  * On February 14, 2013, we obtained a waiver from our current Term Loan
    lenders related to compliance with the leverage ratio covenant for the
    fiscal quarter ended February 2, 2013, and the fiscal quarter ending May
    4, 2013, which means that the next applicable measurement date for the
    leverage covenant is August 3, 2013, subject to the Company’s continued
    compliance with the terms and conditions set forth in the waiver.
  * We continue to work with Moelis & Co. toward the refinancing or
    modification of our Senior Secured Term Loan to achieve an outcome that is
    in the best interests of the Company and all of its stakeholders. In
    addition to seeking an agreement with our Term Loan holders to refinance
    or modify the Senior Secured Term Loan, we continue to explore several
    actions designed to restructure our balance sheet for a sustainable
    capital structure, including seeking new long term debt and/or equity.
  * As previously reported, since October 2011, we have generated proceeds and
    secured tenant improvement allowances through multiple sale-leaseback
    transactions and have reduced term loan debt by more than $90 million.

  * Preliminary net sales for the fourth quarter ended February 2, 2013 (14
    weeks) were $153.4 million compared to net sales of $141.6 million in the
    fourth quarter of fiscal 2011 (13 weeks), and preliminary net sales for
    fiscal 2012 (53 weeks) were $657.6 million compared to net sales of $660.5
    million in fiscal 2011 (52 weeks). The additional week in the fiscal 2012
    periods contributed net sales of approximately $9.5 million. Comparable
    store sales^(1) for the fourth quarter of fiscal 2012 increased 1.6% on a
    13-week to 13-week basis, and for fiscal 2012 were essentially flat,
    decreasing 0.2%, on a 52-week to 52-week basis. Sales growth at the
    Company’s newly remodeled locations continued to outpace the balance of
    its stores. While the Company continued to experience merchandise margin
    pressure in the fourth quarter, merchandise margin improved sequentially
    over the course of the quarter. The Company expects to report final fiscal
    2012 financial results in late April.

Mark Baker, President and Chief Executive Officer, stated, “As we begin 2013,
we remain committed to our repositioning strategy. We have taken a number of
steps in the past year to drive long-term improvement in Orchard’s operating
results and to strengthen our financial position. We are very pleased to have
expanded our credit facility, as planned, and improved our financial
flexibility, both of which provide additional liquidity as we enter our peak
spring selling season. We are gratified by the ongoing support of our lenders
as we continue our work with Moelis & Co. and our financial partners to
achieve a sustainable capital structure that will best position the Company
for long-term success.”

Mr. Baker continued, “We have made significant strides in transforming the
Orchard brand and our business since December 2011 when we became an
independent public company. At the same time, we recognize that we did not
achieve all of our objectives of the past year and that we continue to face
challenges ahead. Our team remains highly focused on our five strategic
priorities, with particular emphasis on the execution of our merchandising,
marketing and store operations initiatives during the important spring season.
We currently have 10 stores in our more productive neighborhood format and we
are pleased with the sales growth we have seen to date at these stores,
including results in the fourth quarter which were improved from earlier in
the year. We look forward to bringing our new format to another 10 stores in
fiscal 2013 through remodels and new store openings. Importantly, we believe
we have established the right business strategy to deliver long-term improved
sales and profitability.”

For additional information related to the expansion of the credit facility and
the waiver, please see the Company’s report on Form 8-K which was filed today
with the SEC.

Footnote

^(1) Comparable store sales are calculated using sales of stores open at least
twelve months and exclude E-commerce. Additionally, and because of an
agreement the Company entered into with Sears Holdings Corporation on October
26, 2011 whereby the Company now sells appliances on a consignment basis and
receives commission income for sales of such appliances and related protection
agreements, fiscal 2011 comparable store sales also exclude approximately
$13.2 million of net sales of Sears branded appliances in fiscal 2011 and
fiscal 2012 comparable store sales exclude approximately $1.7 million of
commission income in fiscal 2012.

About Orchard

Orchard Supply Hardware Stores Corporation operates neighborhood hardware and
garden stores focused on paint, repair and the backyard. The Company was
founded as a purchasing cooperative in San Jose in 1931. Today the stores
average 44,000 square feet of enclosed retail space and 8,000 square feet of
exterior nursery and garden space. As of February 2, 2013, the Company had 89
stores in California. For more information, visit http://osh.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of
1995:

This press release (including information incorporated or deemed incorporated
by reference herein) contains “forward-looking statements” within the meaning
of the Private Securities Litigation Reform Act of 1995. Forward-looking
statements are those involving future events and future results that are based
on current expectations, estimates, forecasts, and projections as well as the
current beliefs and assumptions of the Company’s management. Words such as
“guidance”, “outlook”, “believes”, “expects”, “appears”, “may”, “will”,
“should”, “intend”, “target”, “projects”, “estimates”, “plans”, “forecast”,
“is likely to”, “anticipates”, or the negative thereof or comparable
terminology, are intended to identify such forward looking statements. Any
statement that is not a historical fact and other estimates, projections,
future trends and the outcome of events that have not yet occurred referenced
in this press release, is a forward-looking statement. Forward-looking
statements are only predictions and are subject to risks, uncertainties and
assumptions that are difficult to predict. Therefore actual results may differ
materially and adversely from those expressed in any forward-looking
statements. Factors that might cause or contribute to such differences
include, but are not limited to, factors discussed under the section entitled
“Risk Factors” in the Company’s reports filed with the Securities and Exchange
Commission. Many of such factors relate to events and circumstances that are
beyond the Company’s control. These risks and uncertainties and the risks and
uncertainties relating to the Company’s ability to modify its capital
structure include, but are not limited to, consumer demand for the Company's
products and services, particularly during the spring season; competition and
other factors; continued support from the Company's lenders, vendors, and
landlords; the loss of key executives and employees; the risks to the Company
and its stakeholders associated with the Company’s inability to successfully
refinance or modify its Term Loan and/or raise new long term debt and/or
equity; and the risks that raising additional capital or refinancing or
amending the Company’s Term Loan could be significantly dilutive to its
stockholders. You should not place undue reliance on forward-looking
statements. The Company does not assume any obligation to update the
information contained in this press release.

Contact:

The Blueshirt Group
Christine Greany, 858-523-1732 (Investor Relations)
christine@blueshirtgroup.com