Hastings Reports $1.2 Million in Q4 Earnings, Plans to Reduce Music in Stores

Hastings Entertainment cut its red ink in half for the year by posting net income of $1.2 million, or 15 cents per diluted share, on sales of $141.6 million, for the fourth-quarter ended Jan. 31. That performance contrasts with $8.4 million in red ink in the prior year’s fourth quarter, when sales were $153.1 million.

The black ink in the forth quarter helped Hastings significantly narrow its loss for the year to $9.3 million, or $1.14 per diluted share, on revenues of $462.5 million, from the $17.6 million loss, or $2.05 per share the chain posted in the prior fiscal year when sales were $496.4 million.

In a statement, Hastings CEO/chairman John Marmaduke attributed the 12.9% decline in sales to the growing digital delivery of home entertainment, rental kiosks and subscription-based services. Moreover, the company finished the year with three fewer stores while comparable-store sales declined 5.1% during the year.

While Hastings expects to lose money in its current fiscal year, once again the company will show a significantly lower loss than the one posted in the year just ended. During the year, Hastings said it plans to close eight more stores.

In looking at comparable-store revenue, the music category suffered the second biggest decline a drop of 12% for the year, while video games were down nearly 22%. Movies and books where each down slightly more than 1%. On the other hand, the company’s electronics and trend categories showed comparable-store gains of 12.9% and 8.7%, respectively.

Consequently, Hastings said it would reduce music, rentals and books to make room for about 600 linear feet to bring in new product lines, like hobby, recreation and lifestyle products, as well as expanding inventory in trend and electronics merchandise. The company also said it would increase vinyl in its stores.

So far, Hastings has introduced the new and expanded product categories in 44 of its store and says it will realign merchandise similarly in another 61 stores in the current fiscal year.

“For the full fiscal year, we improved margin rates, improved store execution and reduced selling, general and administrative expenses,” Marmaduke said in a statement.” Finally, by managing working capital, we were able to reduce debt by $11.5 million and pay a dividend of approximately $3.1 million for the first time” in the company’s history.

Hastings’ stock dropped 10 cents to $2.17 on the news.