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Orchard Supply Hardware Stores Corporation Announces Positive Comparable Store Sales For The Second Quarter Of Fiscal 2012

Orchard Supply Hardware Stores Corporation (Nasdaq:OSH), a neighborhood hardware and garden store focused on paint, repair and the backyard, today reported an increase in comparable store sales (1) for the second quarter ended July 28, 2012 of 0.9%. Preliminary net sales were $194.0 million compared to $196.4 million in the second quarter of fiscal 2011.

“We are pleased to deliver positive comparable store sales for the quarter,” stated Mark Baker, President and Chief Executive Officer. “However, the environment remains challenging and our business was more promotional than anticipated, which will likely impact margins in the second quarter. We continue to expect positive comparable store sales for fiscal 2012, as our in-store marketing and merchandising initiatives gain increased traction during the second half of the year.”

The Company also announced that on July 27, 2012 it completed a sale-leaseback transaction with a national REIT for six properties, generating gross proceeds of approximately $43 million. Approximately $25 million of the net proceeds were used to pay-off the Company’s Real Estate Secured Term Loan in its entirety, while approximately $8 million of the balance of the net proceeds will be used to pay-down the Company’s Senior Secured Term Loan. As part of the sale-leaseback transaction, the Company was provided with an improvement allowance, which it plans to use across the stores for a combination of remodels and exterior refreshes.

Mr. Baker added, “This transaction enables us to reduce our debt, while at the same time providing additional capital to continue the transformation of our store portfolio. Our new store concept that was first unveiled in September 2011 is generating improved productivity and has met with positive response from our customers. By the end of fiscal 2012, we expect to have a combination of 12 new and remodeled Orchard stores operating in this format.”

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