Trans World's loss grows in second quarter
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Chain sees potential in revamped stores
By Susanne Ault -- Video Business, 8/23/2007
AUG. 23 | Growing DVD and electronics sales could not stop Trans World Entertainment from sliding further into red ink during its second quarter.
For the three months ended Aug. 4, Trans World recorded a $10.1 million net loss, widened from the $7.7 million net lost it incurred during the comparable period a year earlier.
Quarterly revenue fell 10% to $267.3 million, in part due to the operation of 12% fewer stores. Comparable store sales dropped 6%.
In a Thursday call with analysts, Trans World management insisted the chain would move into the black for its full-year results, citing significant gains in the newly underscored categories of DVD, videogames and electronics, boutique and accessories.
On a comparable store basis, DVD sales were up 7% for the quarter, following a 6% jump in the first quarter. The category represented 36% of Trans World’s second-quarter business, up from 32% last year at this time. Strong catalog DVD sales boosted performance.
Videogame sales rose 5% on a comp store basis, reversing the 12% fall-off the category suffered in the first quarter. The category totaled 8% of business, up from 7% last year.
Also highlighted were electronics, boutiques and accessories, which were up 16% for this quarter, a continuation of the 11% hike in first quarter. These items equal 13% of business, up from 10% from last year.
“DVD, games and electronic accessories and boutique now represent 57% of our product mix, and that is up 9% on a combined basis in the second quarter on a comparable store basis,” said Jim Litwak, Trans World president and chief operating officer. “We feel that we are starting to show signs of our commitment to all things entertainment.”
The momentum of these categories helped offset the 19% comp store decline in music, which represented 43% of chain business in the second quarter. Last year, music made up 51%.
Over the past several months, Trans World has been steadily de-emphasizing its core music offerings in favor of better selling DVDs, games and other entertainment items. Trans World is testing prototype stores that push DVDs and other non-music products to the forefront.
Litwak also noted that this fourth quarter will be a critical evaluation for the prototype stores, which each cost about $30,000 to revamp.
The re-branding of Musicland-acquired holdings to Trans World’s flagship F.Y.E. model was completed in the second quarter. During the period, Trans World closed nine outlets, ending the second quarter with 963 stores. For the total year, Trans World expects it will have closed 45 to 50 outlets.
“We are optimistic about further improvements,” said Robert Higgins, Trans World chair and CEO. “Our outlook for the year remains the same. We continue to expect positive earnings in 2007.”