DVD Helps Hastings Beat The Street27 Mar, 2002 By: Hive News
Doubling floor space devoted to DVD over the last year has been a successful strategy for Hastings Entertainment Inc., which today reported a 73 percent increase in DVD sales and a 140 percent increase in video rentals for the fiscal year ending Jan. 31 over the previous period.
"As I stated last year in our fiscal 2000 earnings release, we believed our commitment to improving efficiencies, the store model, product margins and enhancing customer satisfaction would increase profitability and shareholder value for years to come," said president CEO John Marmaduke, noting the figures beat analyst guidance for the company. "Our financial results released today are the fruits of those efforts and remain our focus for the coming year."
During the first half of the fiscal year the chain completed a remerchandising program that doubled square footage offering sellthrough DVD and substantially expanded its DVD rental selection. The chain also rolled out a new merchandising program for video games and hardware to accommodate new game console formats.
Total revenues for the fiscal fourth quarter 2001 were $149.3 million, up 5.7 percent from the same period last year. Comparable-store revenues rose 7.8 percent for the quarter and included increases in merchandise comps of 8.8 percent and video rental comps of 3.5 percent.
The company attributed increases to the continued growth of DVD for sale and rental and the sale of video games. Video game and DVD sales increased 192 percent and 48 percent, respectively, for the quarter. In addition, fourth quarter rentals of DVD titles increased 117 percent over the same period last year, helping to offset a decline in comps in the struggling music sector (1.2 percent). The music industry overall experienced a decline of 4.1 percent in total music shipments for 2001, a spokesperson said. Book comps were up slightly at 0.9 percent for the quarter.
Video rental margins improved primarily due to increased DVD rentals, which Hastings reported generally reflect higher margins and better terms in revenue-sharing agreements.
For the fourth quarter, gross profit increased 6.4 percent to $48.9 million, or 32.8 percent of total revenues, from $46 million, or 32.6 percent of total revenues for the same period last year.
Total revenues for the fiscal year were $471.8 million, up 3 percent from $458.2 million for the previous fiscal year. Comp-store revenues rose 4.7 percent for the year and included increases in merchandise comps of 4.3 percent and video rental comps of 6.4 percent. Partially offsetting these increases was a decline in music comps of 3.5 percent. Book comps for the year were up 0.3 percent.
For the year, gross profit increased 7.5 percent to $150.2 million, or 31.8 percent of total revenues, from $139.7 million, or 30.5 percent of total revenues for last year.
The increases were offset by a decline in video rental margins resulting from higher depreciation expenses as the chain shifted its mix to include more video games and DVDs. In addition, higher video rental distribution costs contributed to a video rental margin decline as Hastings processed a greater number of rental units through its distribution center.
Operating expenses for the year decreased 3.1 percent to $144.3 million, or 30.6 percent of total revenues, from $149 million, or 32.5 percent of total revenues last year. The decrease was primarily the result of lower costs of closing of underperforming superstores and a decline in accounting and legal fees due to costs incurred during fiscal 2000 related to accounting restatements. During fiscal year 2001, the chain recognized the costs of closing two superstores, both of which were closed by mid-February. During fiscal 2000, it recognized the costs of closing six superstores.