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DVD Resilient, Trans World Financials Not
DATE[ 2008/11/21 ]    HIT [3299 ]

By Erik Gruenwedel | Posted: 20 Nov 2008

Steady DVD sales coupled with the emerging Blu-ray Disc format couldn£§t counter a macroeconomic reality that continues to batter retailers including Trans World Entertainment Corp.

The Albany, N.Y.-based parent to 786 f.y.e. (For Your Entertainment), Suncoast and Second Spin stores said third-quarter (ended Nov. 1) DVD sales slipped 5%, due largely to a 24% decline in new releases rather than economic conditions.

¡°DVD did outperform the industry in the quarter as strong promotion and better depth of catalog helped counter the steep decline in new releases,¡± Jim Litwak, president and COO, said in a call with investors. ¡°We also saw Blu-ray begin to emerge as a potential meaningful growth opportunity.¡±

Video now represents 41% of Trans World¡¯s business, up from 38% last year.

Despite video¡¯s buoyancy, economic woes continued to impact the bottom line as Trans World reported a net loss of $28.4 million ¡ªnearly double the loss of $14.3 million during the previous year period.

Gross revenue dropped 25% to $195.2 million from $260.6 million in the same quarter last year, when it operated 962 stores compared to 786 stores this quarter.

Same-store sales (open at least 12 months) fell 14% from last year.

¡°As you know, we are operating in a difficult retail environment with consumer spending down,¡± said Robert Higgins, chairman and CEO of Trans World. ¡°Our performance was well below expectations.¡±

Same-store music CD sales dropped 22% (representing 38% of the business), which was a 1% improvement from the first two quarters.

¡°The decline is in line with the industry (new releases were down 29%) and an improvement in our performance during the first half of the year,¡± Litwak said.

Comp-store video game sales dropped 32% and represented 8% of business, unchanged from last year.

Trans World reduced the number of stores carrying games to 400 from 600 last September, based on a strategy of building the business with greater product in fewer stores to strengthen game-selling culture.

¡°While we made the transition last year, we also aggressively cleared out product,¡± Litwak said. ¡°Strong clearance sales coupled with the ¡®Halo¡¯ new release last year caused difficult comps this year.¡±

Trans World lowered its inventory levels (and related expenses) $100 million from a year ago. It also closed three stores during the quarter.

Edward Woo, who covers Trans World for Wedbush Morgan Securities in Los Angeles, said the retailer¡¯s balance sheet remained relatively solid in the short term.

¡°I think they have at a decent chance to turn things around, but in this environment, it£§s a tough challenge,¡± Woo said. ¡°The silver lining is that they aren£§t in bankruptcy, yet.¡±


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