Rental Kiosks, SVOD Torpedo Hastings Q4 Results19 Mar, 2012 By: Erik Gruenwedel
Southwest chain transitioning away from entertainment to lifestyle products
Hastings Entertainment March 19 reported a fourth-quarter (ended Jan. 31) net loss of $8.4 million, citing a weak retail release slate in addition to increased competition from rental kiosks and subscription video-on-demand services such as Netflix.
Amarillo, Texas-based Hastings, which operates 139 stores selling home entertainment, music, books, consumer electronics and trends in the southwest, reported income of $3.8 million for the same period in the prior year. For the fiscal year, the net loss mushroomed to $17.6 million, compared with income $1.7 million in the prior year.
The declines underscore the urgency among studios in rolling out digital storage platforms such as UltraViolet, which are intended to invigorate entertainment sellthrough of both physical and digital media.
“Our fourth-quarter results reflected a continuation of comparable weak slates for movies,” CEO John Marmaduke said in a statement. “Furthermore, we continue to be impacted by the shift toward the digital delivery of entertainment, along with the increasing growth of rental kiosks and subscription-based services in movie rentals.”
Noteworthy is the stark contrast between Hastings’ declines in home entertainment and nationwide rival Trans World Entertainment, which reported quarterly net income of more than $16 million, in addition to its first annual profit since 2006.
Indeed, Hastings’ movie rental revenue in the quarter fell nearly 18% to $17.6 million, compared with revenue of $21.4 million last year. Same-store rental sales dropped 16.7%. Comp movie sales declined nearly 11%, compared with a 1.1% increase last year.
The lone bright spot was an increase in Blu-ray Disc rentals.
Other product categories included a 9.8% drop in music CD sales, 7.8% comp store decline in video games and 3.3% drop in consumables. Positives included 2.4% same-store increases in books (driven by sales of the Nextbook Premium 7 e-reader), in-store coffee shop (4.4%), electronics (6.6%) and trends, which include T-shirts, licensed apparel and jewelry (9.5%).
Overall merchandise sales in the quarter dropped 2.6% to more than $135 million, compared with nearly $139 million last year. Hastings operated 143 stores in the period, compared with 147 stores in the prior year. It closed an additional four stores in the quarter in Tennessee, Kansas, New Mexico and Colorado.
For the fiscal year, movie rental revenue dropped more than 12% to $70.4 million, compared with revenue of more than $80 million in the previous year. Same-store movie sales dropped 8.2%, compared with an increase of 6.3% in the prior year due to lower sales of new and used DVDs, along with DVD boxed sets, partially offset by increased sales of new and used Blu-ray movies. Total merchandise revenue slid 3.4% to $425 million from $440 million in the previous year.
Relying on its multimedia product platform, Hastings will up retail floor space to e-readers, tablets and phone apps. It also will increase availability of lifestyle products, including skateboards, disc golf and related accessories. The chain will reduce its movie rental footprint throughout all stores.
“Fiscal 2012 will be a difficult year for us as we continue to weather difficult economic times and secular trends,” Maramduke said. “Accordingly, we are projecting a net loss for fiscal 2012.”