Trans World Entertainment Doubles Losses in Second Quarter
Trans World Entertainment has lost $5.1 million on revenues of $71.9 million, or 16 cents per share, for the quarter that ended Aug. 2. That loss is double the $2.54 million, or 8 cents per share, in red ink the company posted last year in the corresponding period when its revenues were $80.8 million.
The company attributed the increase in red ink due to de-leveraging overhead: the shrinking of the company revenue base from store closures against fixed costs.
The company finished the quarter with 327 stores, down from 355 at the end of the second quarter in the previous year. Higgins said that represents a 7 percent reduction in store count and a 9 percent reduction in square footage. In addition, the chain suffered a 3.4 percent decline during the quarter. Overall, sales were down 11 percent for the quarter.
"Despite the challenging results for the quarter, we are approaching the second half optimistically as we completed many of our merchandising initiatives which resulted in improved results in July," chairman and CEO Bob Higgins said in a statement.
Moreover, Higgins said the company continues its transformation from an entertainment software merchant to a "complete entertainment destination." Last week, the company opened its new concept store, which offers a broader assortment of non-media product, around the company's core product of music and video.
Looking at performance by product line, Higgins reported during an investor's conference call that video, which is 44 percent of the chain's overall revenue, had a 1 percent comparable-store decline due to weakness in the DVD format and despite double-digit comparable-store increases in blu-ray. Meanwhile, music suffered a 12 percent comparable-store decline, as the product category fell to 29 percent of the chain's revenue, as opposed to the 32 percent it comprised last year at the mid-year point.
Yet, within music, he said vinyl is a bright spot, and the company now has 6-8 feet of vinyl racks in most stores, with some free-standing stores devoting even more space to the category. "We have significant expansion plans in the category," Higgins said, although he cautioned that the chain would expand it where appropriate.
In general, Trans World has been reducing the space devoted to music he said, in keeping up with the marketplace. But he added that despite a reduced presence, the decline in overall sales volume isn't as large as the reduction in music inventory.
In other product lines, trend merchandise produced a 5 percent comparable-store increase as the business grew to 13 percent of chain revenue from 10 percent at the midway point last year; while video games produced a 6 percent comp-store gain to help that product line to grow to 4 percent of volume from 3 percent last year; and electronics were up 1 percent on a comp-store basis as the business now accounts for 10 percent of overall volume.
For the first half of the fiscal year, the company has lost $5.5 million, or 17 cents per share, on revenues of $159.1 million, versus a nearly $1 million loss, or three cents per share, on revenues of $174.7 million for the corresponding period last year. For the first half, the company's earnings before interest, depreciation and amortization was $9.8 million in red ink versus $1.8 million in EBIDTA for the first six months of the prior year.
During the last 12 months the company has returned over $20 million to shareholders, Higgins noted. The company finished the quarter in a strong cash position with $82 million in cash, $42 million in accounts payable, $134.6 million in inventory in stores and in the warehouse.
Despite the reduction in music, Higgins noted that the chain still plans to "capitalize on opportunities in core categories of music and video."