DVD, Game Revenue Up At Hastings26 Mar, 2003 By: Holly J. Wagner
A strong fourth quarter performance at Hastings Entertainment wasn't enough to offset the drag of a $2.6 million shareholder class action payment, and sagging music sales. the chain reported today.
Gross revenue from DVDs increased 44 percent and video game revenue was up 70 percent for the fourth quarter compared to the same period last year. The same categories grew 52 percent and 102 percent, respectively, from 2001 to 2002; and 108 percent and 92 percent, respectively, from 2000 to 2001.
Hastings revenue generated from new CD sales decreased 10.2 percent for fiscal year 2002, but sales of used CDs, music accessories and musical instruments stabilized the music category to a 6.3 percent decline for the year.
The 145-store chain had net income of $9.6 million for the fourth quarter, up from $9,5 million in the prior-year quarter, but sunk from $4 million for fiscal 2001 to $1.9 million for the full fiscal year ended January 31, 2003.
An increase of 4.1percent in comparable-store revenues helped total revenue for the fourth quarter increase by $7.6 million, or 5.1 percent, to $156.9 million, compared to $149.3 million a year ago. The chain attributed the gains to increases of of 5.7 percent in rental video comps and 3.8 percent in merchandise comps.
Total revenue for fiscal year 2002 increased $23.7 million, or 5 percent, to $495.4 million compared to $471.7 million for fiscal year 2001, with rental video comps up 5.9 percent and merchandise comps up 4.8 percent for the year.
For fiscal year 2002, total gross profit increased 7.2 percent to $160.9 million, or 32.5 percent of total revenues, from $150.1 million, or 31.8 percent of total revenues in 2001. Executives said the increase was primarily the result of an increase in rental video gross profit resulting from increases in the rentals of non- revenue sharing titles, which generally reflect higher margins, and improved margins on videos acquired under revenue sharing agreements.
Selling, general and administrative expenses as a percent of total revenues increased to 31.9 percent for fiscal year 2002 from 30.5 percent for fiscal year 2001, the result of s $2.6 million charge for the settlement of shareholder class action lawsuits; $3.8 million in increased personnel costs; a planned increase of approximately $3.3 million in advertising expenditures to drive comp revenues and customer traffic; a $1.8 million hike in overhead owing to a higher number of ; and an increase of approximately $1.7 million in increased depreciation and consultant fees related to implementating new financial software and upgrades in our human resource systems; and an unplanned increase of approximately $0.8 million in the group healthcare costs, the majority of which was attributed to two large medical claims incurred at the end of July 2002.
Partially offsetting these increases in SG&A were decreases of approximately $1.7 million in net expense associated with the closing of certain superstores and improved sublease activity and a decrease of approximately $0.8 million in other SG&A expenses.
Executives cited the newly developed "3-Across" floor plan, which divides the store into three product groups, as a prime mover in comp revenues. Relocated and expanded stores using the layout recorded double-digit comp increases for fiscal year 2002 and met expectations.
“We will accelerate the growth of our '3-Across' floor plan during fiscal year 2003," said president and CEO John H. Marmaduke. "The new layout will be implemented in five new and 17 relocated or expanded stores, which will bring the total percentage of our chain with the new layout to approximately 25 percent."