Service Merchandise to Open Five New Service Select Stores

Kissimmee, FL store opens September 26

NASHVILLE, Tenn.--(BUSINESS WIRE)--Sept. 24, 1998--Service Merchandise (NYSE:SME - news) will build on the successful test of its new, edited assortment and smaller retail concept, known as Service Select, with the opening of five additional stores this fall. The first will open in Kissimmee, FL this Saturday, September 26.

The other Service Select stores will open in Bowling Green, KY on October 17; Elizabethtown, KY on November 7; and Casselberry and Spring Hill, FL on November 14.

The new Service Select stores are approximately 10-12,000 square feet in size and feature a full-size jewelry department and an edited, 'best of the best' assortment from most of the company's home products and gift categories. This compares to an average store size of 50,000 square feet for the chain's full-size locations.

``As we work to improve the performance of our existing store base, we are also developing other potential new growth vehicles for the future,'' said Company President and CEO Gary M. Witkin. ``The Service Select prototype is one such vehicle which builds on our enormous core strengths in fine jewelry, home products and gifts.''

He noted that the test store in Douglasville, Georgia, introduced in December, 1997, has produced higher gross margin percentages than other Service Merchandise stores, due to its significantly higher proportion of fine jewelry sales. The store also has demonstrated a higher return on invested capital due to lower capital costs associated with the format's smaller size. With the fall openings, the company will test the concept in rural, satellite and in-market locations, primarily in neighborhood shopping centers.

Mirroring the recent changes instituted in the chain's larger-format stores, Service Select offers customers a hassle-free, self-service shopping environment, in which most items are displayed in quantity and can be taken directly to the check-out.

The new stores will also feature kiosks with direct access to Service Merchandise's on-line store at www.servicemerchandise.com, where customers can view and buy any of the other items in the Company's full assortment of 10,000+ home and fine jewelry products.

On Labor Day weekend, Service Merchandise launched a new self-service shopping format and a new, broader assortment of trend-right merchandise for the home in its traditional-sized stores across the country. Witkin noted that Labor Day weekend also marked a renewed commitment to providing fast, friendly and knowledgeable customer service.

Service Merchandise is a fine jewelry and home store offering dominant selections of name brand products and value pricing in the merchandise worlds of fine jewelry, kitchen and dining, home accents and furniture, fitness, seasonal, travel, electronics, and kids. The Brentwood, Tenn.-based company operates 353 stores in 34 states, employing approximately 24,000 associates. Service Merchandise stock trades on the New York Stock Exchange under the symbol SME. More information is available on the company's web site at http://www.servicemerchandise.com.

Contact:

     Service Merchandise
     Greg Winnett, 615/660-7092
     or
     Wade Smith, 615/660-3310

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