Harry's Farmers Market, Inc. (OTC BB: HARY) yesterday reported results for the Second Quarter of Fiscal 2002 ending August 1, 2001.

The Company had a net loss applicable to common shareholders for the Second Quarter of Fiscal 2002 of approximately $0.9 million or ($0.15) per common share, compared to a net loss applicable to common shareholders of approximately $1.1 million or ($0.18) per common share for Second Quarter of Fiscal 2001.

In addition, for the twenty-six weeks ended August 1, 2001, the Company had a net loss applicable to common shareholders of approximately $1.8 million or ($0.29) per common share, compared to a net loss applicable to common shareholders of approximately $2.3 million or ($0.37) per common share for the twenty-six weeks ended August 2, 2000. Included in the loss applicable to common shareholders for the first half of Fiscal 2001 is an extraordinary loss of approximately ($0.3) million relating to the early retirement of debt. There was no such extraordinary charge during the recently completed comparable period.

In addition, the Company reported that net sales decreased to approximately $33.3 million in the Second Quarter of Fiscal 2002 from approximately $35.3 million in the Second Quarter of Fiscal 2001. For the twenty-six weeks ended August 1, 2001, the Company reported net sales of approximately $64.4 million compared to approximately $70.2 million for the twenty-six weeks ended August 2, 2000. Management believes these decreases are due primarily to a continued trend of competitive stores opening near existing Harry's Farmers Market and Harry's In A Hurry locations, as well as a general economic downturn in the entire retail sales industry.

The Company reported an improved gross profit percentage of 29.6% during the Second Quarter of Fiscal 2002 as compared to 28.4% during the First Quarter of Fiscal 2001, as well as an improvement to 30.1% for the twenty-six weeks ended August 1, 2001 from 28.5% over the twenty-six weeks ended August 2, 2000. Although overall gross profit decreased during such periods due primarily to a decrease in net sales, the continued emphasis at improving operating efficiencies throughout the Company contributed to the increase in gross profit percentage.

The Company also reported an improvement in its loss from operations between the Second Quarter of Fiscal 2002, with a loss from operations of approximately ($0.23) million compared to a loss from operations of approximately ($0.39) million in the Second Quarter of Fiscal 2001. For the twenty-six week periods ended August 1, 2001 and August 2, 2000, the loss from operations improved to approximately ($0.31) million from ($0.59) million.

The Company previously announced an agreement to sell its three megastores and support facilities to Whole Foods Market Group, Inc., a wholly-owned subsidiary of Whole Foods Market, Inc. (Nasdaq: WFMI), for approximately $35 million in cash. Approximately $23 million of the proceeds will be used to pay off and retire the Company's credit facility with Back Bay Capital and pay transaction fees. Included in the sale are all assets relating to the Alpharetta, Cobb and Gwinnett megastores, including but not limited to the real estate, the Harry's Farmers Market name, distribution center, commissary kitchen, bakery and office facilities. The six ``Harry's in a Hurry'' food stores are not included in the transaction. The Company retains the use of the ``Harry's in a Hurry'' name through a license from Whole Foods along with the right to operate and grow these stores in the United States. The transaction is expected to close in November and is subject to approval of the Company's shareholders and other customary closing conditions. The Company is continuing to explore all viable strategic alternatives regarding the Harry's In A Hurry stores, which may include, but are not limited to, continuing to operate and possibly expand some or all of the stores, the sale of some or all of the stores or the closure of some or all of the stores. There can be no assurances that any actions taken by the Company will result in any transaction or as to the value that any such transaction might have.

Harry's owns and operates concept megastores and convenience stores specializing in perishable food products - fresh fruits and vegetables; fresh meats, poultry and seafoods; fresh baked goods; freshly made ready-to-eat, ready-to-heat and ready-to-cook prepared foods; and deli, cheese and dairy products. Harry's stores also feature lines of specialty, hard-to-find and gourmet nonperishable food products that are complimentary to the fresh food offerings. In addition, Harry's stores carry kitchen-oriented housewares, floral items, natural health and beauty care items, and a full line of wines and imported and domestic beers. Harry's bakery and prepared foods departments are fully-integrated food manufacturing operations. Harry's presently owns and operates three megastores and six Harry's In A Hurry convenience stores all in the in the Atlanta, Georgia metropolitan area.

Statements made in this press release, other than those concerning historical information, should be considered forward-looking and subject to various risks and uncertainties. Such forward-looking statements are made based on management's belief, as well as assumptions made by and information currently available to management, pursuant to the "safe harbor" provisions of the Private Securities Litigation Reform Act of 1995. Harry's Farmers Market, Inc. may experience actual results that differ materially from the results anticipated in these forward-looking statements due to a variety of factors, including the risk that the transaction with Whole Foods is not consummated, the possibility that funding may be inadequate to cover the Company's future plans, the inherent difficulties in opening new locations and the risk of market acceptance for new locations, the uncertainty related to operating the Harry's In A Hurry stores without the full support of the megastores' personnel and operations, unforeseen costs and expenses in implementing new systems and controls, the impact of certain litigation, the cost and timing of implementing various initiatives and other factors, including, but not limited to, those identified in Harry's Farmers Market, Inc.'s Annual Report on Form 10-K for the most recently ended fiscal year.