Trans World Entertainment reported a loss of $386,000, or one cent per share, on sales of $87.2 million for the fiscal first quarter ended May 3. That compares with the $1.6 million, or 5 cents per share, in profit that the company reported in the corresponding period last year, when sales were $93.9 million.
In addition to the slide in red ink, the company's sales slid 7.2% due to the net closure of 20 stores from the prior year, to having 333 stores in operation at the end of the first quarter. The chain last posted a quarterly comparable-store sales increase in the first fiscal quarter of 2012.
The loss in sales resulted in an increase in selling, general and administrative expenses as a percentage of revenue to 36.5% from 34.9% in the same period last year.
Meanwhile, gross profit also declined to 37.6% from 38.1% in the same period last year, due to increased promotional activity.
In looking at individual product lines, Trans World chairman and CEO Bob Higgins said in an investor conference call that music declined 6.2% on a comparable-store basis. But despite that decline he pointed out that the chain "continues to outperform the music industry as competitors exit the business. He said Trans World's performance in music was "driven by the depth of our selectio and a strong value statement."
For other product lines, Higgins said on a comparable-store basis trend merchandise was up 11%, electronics were down by 8.3%, and video games were up 17%. Movie and TV/video also turned in a strong performance, driven by "Frozen" and strong catalog sales, he added.
During the quarter, the company bought back $800,000 in shares as part of its stock-buy back program and paid out a 50 cent-a-share dividend, or a total of $16 million. The company finished the quarter with $90 million in cash.
Higgins said the company will continue to "diversify inventory mix while maximizing sales in core businesses."
As part of that, the company will continue to increase trend merchandise, which produces greater gross than other product lines. When asked if there was a target growth percentage, Trans World CFO John Anderson noted that the presence of trend merchandise in the chain's inventory mix is tied to how music performs; as music declines, the former will increase, "but it's hard to give you a percentage for the long-term," he said.