Trans World ends 2007 with loss

By Susanne Ault -- Video Business, 1/10/2008

JAN. 10 | Despite earlier break-even projections, Trans World will wind up 2007 with a $15 million to $20 million net loss after a disappointing holiday season.

In a Thursday conference call with analysts, chain management faulted lower catalog DVD prices and soft CD demand for contributing to a weak November and December period. Comparable store sales for those months were down 12% from the 2006 period. For the five-week December, comp sales slipped 13%.

Total sales for the five-week period fell 24% to $264 million. November to December sales were down 19% to $378 million.

The sobering news coincides with Trans World’s decision last month to shutter 138 primarily underperforming F.Y.E. and Suncoast stores as their leases were expiring.

“This season’s holiday sales were lower than expected,” said John Sullivan, Trans World chief financial officer. “The break-even forecast was predicated on a fourth-quarter comp sales decrease in the low single digits, based on improving trends we had experienced through the first three quarters.”

DVD, normally one of Trans World’s stronger categories, dropped 7% in comp sales for November and December. Along with cheap catalog pricing biting into revenue, new DVD releases struggled, with the top 50 titles off 12% in sales from last year’s top 50 batch.

An ongoing soft spot, music fell 28% in comp sales, and the top 50 CD releases were down 29% from last year.

Trans World continues to shift is focus away from music and into other relatively brighter categories, including DVD, videogames and electronics. Music represented 33% of Trans World holiday business, down from 39% last year; DVD was 42%, which is up from 41% last year.

The chain did achieve comp sales gains in videogames, which were up 6% due largely to a greater stock of hardware systems Wii, PlayStation 3 and Nintendo DS Lite. Electronics, boutique and accessories lifted 9%.

Trans World management is optimistic that 2008 will mark a reversal of their fortunes. Participating in the call from the Consumer Electronics Show, Trans World president Jim Litwak said he foresees an end to the high-definition format war following Warner Home Video’s decision to back Blu-ray Disc exclusively.

“Finally the customer has some understanding of where this business is going to go and not be confused,” Litwak said. “Frankly, we saw the confusion this whole year, and in the way we have had to set up [two formats] to sell to the customer. It looks like the platform war is pretty much over, and Blu-ray becomes the new DVD format. I like that a lot, and it plays into growing the video business as a larger percent of our total" product mix.