Trans World Entertainment posted a loss of $11.4 million, or 37 cents per diluted share, on sales of $297.7 million, for the fiscal third quarter ended Oct. 28. The loss would have been greater, but the company enjoyed an extraordinary gain of 6 cents per share due to the realization of unallocated negative goodwill, associated with the company's acquisition of Musicland earlier in the year.

The gain in sales is attributed to Musicland, offset by 5% decrease in comparable store sales. For the quarter, gross profit increased to 36.6% of revenue from the 34.4% the company posted in 2005's fiscal third quarter. But selling, general and administrative expenses increased to 40.4% from 38.8% last year.

The third quarter loss brings the company's red ink for the year thus far to a total of $26.2 million, 85 cents per share, on sales of $884.5 million. It's a bigger loss than the $19.4 million, or 60 cents a share, the company posted in the nine months of the prior year when sales were $779.9 million.

In a statement, Trans World chairman/CEO Bob Higgins says that while the company enjoys strong comparable store gains in its key focus areas of DVD, electronics and games, the music category continues to drag down its overall performance.

"We made progress in the quarter on initiatives that will improve our operating results in the fourth quarter," Higgins said. "These include the continued remerchandising of stores to highlight our DVD, electronics and games categories, the re-branding of Sam Goody and free-standing stores to the F.Y.E. brand and the conversion of Musicland's Replay Rewards customers to our Backstage Pass customer loyalty program."

Trans World dropped four cents to $6.80 on the news.