Trans World Entertainment chairman/CEO Bob Higgins is stepping down from his role as CEO, the retailer announced, as it posted its third consecutive year of net profits after a strong fiscal fourth quarter. The company said a search is underway for a replacement but Higgins, who founded the chain, would remain chairman of the board.
Thanks to a fourth quarter performance that saw the chain report $12.5 million in net income on sales of $139.2 million, for the period ended Feb. 1, 2014, Trans World finished with black ink. While the chain turned in a profitable fourth quarter, its performance represented a decline from the $35 million reported in the fourth quarter ended Feb. 2, 2013 when sales were $163.5 million, which represents declines, respectively, of 64.2% and 14.8%.
For the year, Trans World Entertainment reported $8.2 million, or 25 cents per diluted share, in net income, on sales of $393.7 million. That's down 75.4% from the $33.7 million, or $1.07 per share, in net income for the prior year; while sales were down 14.1% from $458.5 million.
But the prior year's profits was boosted by a onetime windfall from the sale of a real estate asset, a store in South Beach, Fla., which brought in $22.8 million. Without the sale of that property, the company's net income fell 24.8% from the prior year's adjusted net income of $10.9 million
Since gross profit improved to 37.6% of revenue in the just-completed year from the 37.5% in the prior year, and selling general and amortization only moved up a couple of ticks to 34% from 33.8% in the prior year, that means the drop in sales is the main reason behind declining profits.
The company finished the year with $131 million in cash, almost the same as last year when it had $133 million in cash. Consequently, the company announced a special dividend payout of 50 cents per share, or $16 million from cash on hand.
At the end of the year, the chain's store count was down to 339 units from 358 outlets at the end of the prior year. Higgins said that during the year, the company had added 14 new stores through relocations and opening new outlets. But he said that over the next few years, he expected the chain would close more stores than it opens, but it would more along the narrow gap that now exists, as opposed to when the gap was much wider during the years its store cound was declining from 1,000 stores to its current count.
Besides fewer stores, the company also experienced a sales drop due to a comparable store sales decrease of 5%. Also, the most recent fiscal year comprised a normal 52-week year compared to 53 weeks the prior year.
The company didn't break out sales by category for the year, but during a conference call Higgins noted that music was down 13% on a comparable-store basis for the fourth quarter, when it comprised 26% of volume, down from 28% of sales in the corresponding fourth quarter of last year.
When asked by an analyst if the chain was still a music retailer, Higgins responded that the chain would still be represented in music even as it brought in other growth categories, mainly trend merchandise. He added that the chain's position in music benefits because other merchants that carry the product line have been reducing their commitment to CDs.
"We are known as record stores, even though our video is much bigger," Higgins said. "We know we have to shift and make our stores different."