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Trans World Entertainment Nearly Doubles Q3 Loss

17 Nov, 2016 By: Erik Gruenwedel

Retailer attempting to offset package media declines with digital and trend category retail

Trans World Entertainment Corp. Nov. 17 reported a third-quarter (ended Oct. 29) loss of $8.1 million, which was up 88% from a loss of $4.3 million during the previous-year period. Revenue dropped 4% to $66.3 million from $69.1 million.

Trans World, which operates the f.y.e. (For Your Entertainment) retail chain, attributed the loss to ongoing challenges in mall store business, declining packaged-media consumption and $2.7 million in costs associated with the $75 million acquisition of online retailer Etailz.com.

The company operated 294 stores in the quarter compared to 309 stores at the same time last year, a 4.9% decline. Trans World is opening eight new “concept” f.y.e. stores in the current quarter.

“Our quarter was highlighted by the acquisition of Etailz,” CEO Mike Feurer said in a statement.

While some may question the wisdom of spending tens of millions on a digital retailer that sells primarily through Amazon, Trans World is also aggressively trying to capitalize on trend merchandise, offering pop culture items such as action figures, posters, trading cards, T-shirts and related content.

During the quarter, Etailz contributed $940,000 in gross profit, or 24.6% of Etailz’s $3.8 million revenue in the post-acquisition period. 

Comparable store sales dropped 5%, as a 27% comp increase in the trend category was offset by an 18% decline in heritage media categories. Trend sales increased 27% and represented 32% of business, compared with 23% a year ago.

Electronics comp sales increased 8% and represented 10% of revenue, compared with 9% a year ago. Video comp sales dropped 16%, representing 35% of business compared with 41% a year ago. Music CD comp sales declined 18%, despite increases in vinyl sales. The category represented 22% of sales, compared with 25% a year ago.

Both video and music were negatively impacted by fewer new releases.

“While these categories continue to decline, they still represent 57% of our business,” chief merchandising officer Scott Hoffman said on the call. “We are focused on providing our customers strong selections in these categories.”

The push toward trend continues despite retail competitors Hastings Entertainment and MovieStop recently going out of business after allocating significant resources on trend.

On the call regarding Etailz, Trans World said it was reviewing and would update — if necessary — “certain preliminary purchase price allocations” as of the acquisition date, specifically related to definite lived intangible assets and deferred taxes.

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