Hastings Continues to Perform Well During Recession23 Mar, 2009 By: Erik Gruenwedel
Strong sales of Blu-ray Disc players and digital TV converter boxes offset ongoing effects of the economic downturn and contributed to Hastings Entertainment posting fourth-quarter fiscal-2008 (ended Jan. 31) income of $4.1 million, compared to income of $5.8 million during the prior-year period.
Typically a 30% drop in profit might be cause for concern, but given the recession and acute lack of consumer confidence — especially in electronics and entertainment retail — investors reacted favorably, sending Hastings stock up more than 5% in midday trading.
Indeed, Amarillo, Texas-based Hastings said same-store sales of electronics increased 1.6% and up 12.9% for the fiscal year.
“As the economy weakened further in the fourth quarter, we continued to outperform most of our major competitors in same-store sales,” said John Marmaduke, chairman and CEO, in a statement. “This speaks well of our multimedia store model and the relatively low price points for our new and used merchandise and rental products.”
Hastings attributed the 8.1% same-store decline in movie sales to underperforming sales of new DVDs and DVD boxed sets during the recession. This was partially offset by strong sales of new and used Blu-ray movies as well as increased sales of used DVDs.
For the fourth quarter, total rental operating income decreased about $700,000 to $14.4 million, from $15.1 million for the same period the previous year. Rental comps decreased 3.3%, primarily as a result of fewer rentals of new DVDs, and were partially offset by increased rentals of video games and Blu-ray titles.
Rental video game comps increased 16.1% for the period while rental movie comps decreased 4.1%.
Total revenue for the quarter declined 2.7% to $166.8 million, compared to $171.4 million the previous year.
Strong book sales of the “Twilight” series by Stephenie Meyer bode well for the Twilight DVD and Blu-ray releases in the current quarter.
Not surprisingly music comps fell 17.8% in the quarter (16.3% in the fiscal year) due to the continued industry decline, as well as Hastings’ de-emphasis on the category and reduction of retail space dedicated to music in 30 stores during fiscal 2008.
For the fiscal year, revenue topped $538 million, down 1.7% from $547.6 million the previous year. Income fell nearly 60%, to $4.1 million from $10.2 million last year.
Marmaduke was especially pleased the retailer reduced $14.4 million of its debt despite the economy.
“Hastings remains financially healthy, with strong cash flow and ample borrowing capacity,” Marmaduke said. “We believe we are well-positioned to continue to weather this downturn and to accelerate results once the economy begins to rebound.”