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Diversity Continues to Fuel Hastings' Profit

19 May, 2008 By: Erik Gruenwedel

Executing a business plan coveted by a national intrastate brand to the south, Hastings Entertainment Inc. posted first-quarter (ended April 30) income of $3 million, up 20% from $2.5 million income in the prior-year period.

The profit marked the fifth consecutive quarter the Amarillo, Texas-based retail chain with 153 stores posted comparable net income growth based on a blend of rental and sellthrough, including video games, movies, hardware, books and coffee, among other products.

Dallas-based Blockbuster Inc., which is actively courting consumer electronics retailer Circuit City Stores Inc., has made no secret its desire to embrace entertainment hardware, coffee and snacks, along with its core movie and game rental business.

They could do worse than emulate Hastings' 4.2% same-store (open at least 12 months) sales growth, spearheaded by a 29.8% increase in video games, electronics (26.8%) caf? (14.2%), consumables (12.5%), books (5.6%) and DVDs with 3.2%.

On the flip side, music CD comp sales declined 16%, compared to a 13% drop during the prior-year period.

“Everybody, including Blockbuster and Trans World Entertainment Corp., wants to emulate the fast-growing sector of video games over weak ones such as music and rentals,” said Edward Woo, analyst with Wedbush Morgan Securities in Los Angeles.

Merchandise revenue totaled $108.3 million, up 3.1% from $105 million last year.

Principle game software sales included Grand Theft Auto IV, Mario Kart Wii, Super Smash Bros. Brawl, Army of Two and Turok.

Sales of refurbished Apple iPods and MP3 players, in addition to Sony PlayStation 3 and Nintendo Wii controllers, lead electronics sales.

Sales of new and used movie DVDs, boxed sets and Blu-ray Discs included titles such as I Am Legend, Alvin and the Chipmunks, American Gangster and No Country for Old Men, among others.

Movie rental comps increased 3.8%, driven by games as revenue topped $23 million, compared to $22.9 million the previous year. The retailer said it would continue to focus on movie and game sellthtough versus rental based on enlarged consumer demand for the former.

Total retail revenues increased $3.9 million, to $131.9 million, from $128 million the previous year.

“Buy, sell, trade, rent creates a new retailing synergy by offering greater value and selection,” said John Marmaduke, CEO of Hastings. “We have an opportunity to take advantage of weakened competitors with our new and used entertainment superstore, while additionally delivering exceptional value to our customers in a difficult economic environment.”

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