Chain hits earnings forecast in Q2.
Although Hastings Entertainment hit its earnings forecast by generating $671,000 in net income, or six cents per diluted share, on sales of $122.7 million in the three-month period ended July 31, the Amarillo, Texas-based company lowered its annual earnings estimates to 47-50 cents per share from 55-58 cents per share due. The company announced its financial results on Monday (Aug. 23).
While Hastings was able to effectively manage cost of goods and keep expenses under control, revenue for the 153-unit chain--in particular video rental revenue--wasn’t as strong as projected, says Hastings VP and CFO Dan Crow. The revenue total was $122.7 versus the $122.4 million the company had in its fiscal second quarter last year, when net income was $632,000, or five cents per diluted share.
While overall comparable-store sales were down 0.8%, Hastings remains ahead of other book merchants it its music performance, with comparable-store sales for the category only down 0.9%, versus a double-digit comparable-store decline for Borders and a mid-single digit decline for Barnes & Noble.
Meanwhile, video rental, which is about 20% of the chain’s overall revenue suffered a 9.3% a comparable-store decrease. Video games and boutique were the best-performing categories for the chain, with the former up 14.6% and the latter up 11.8% on a same-store basis.
The company also turned in positive number for books, as store sales in that category were up 1.2%. That was mainly due to "Harry Potter and the Half-Blood Prince," which came out on July 16, according to Dan Crow. But even though book sales were up, in general Hastings has been trending behind other book merchants on comparable store sales in its recent history and this quarter is no exception as it trailed behind Borders, which generated a 6% comparable-store increase from the book category. Earlier this year the company brought in Ed White, formerly from Baker & Taylor, to improve the chain’s book department and he has begun implementing changes that should have an impact, Crow said.
During the quarter, the chain’s gross margin was 36.7% of revenues while expenses were 35.3%. “Comp[arable]-sales have never been a problem for us, and now we have the costs in line, but we are having a revenue issue,” Crow notes.
In other company news, Jeff Ostler has been hired as VP of operations, to replace Rob Berman who left in April. Ostler previously had served as division VP retail operations for the Dollar General Corp., and most recently as VP of store operations for Denninghouse Inc., a Canadian corporation which operates stores under the logo “Buck or Two.”
For the six month period Hastings garnered net income of $1.4 million, or 12 cents per diluted share, on sales of $251.9 million, versus the $2.6 million, or 22 cents per diluted share, it made last year in the corresponding period when sales were $249.4 million.
Hastings stock has hardly been impacted by the news as it traded up six cents on the news, closing at $6.24, on Monday, before closing at $6.23 on Tuesday, Aug. 23. its 52-week range is $5.05-$9.99.