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DVD Sales Spur Trans World Revenues Despite Q3 Loss

16 Nov, 2006 By: Erik Gruenwedel

Despite strong DVD sales of X-Men: The Last Stand, The Little Mermaid and V for Vendetta, Trans World Entertainment posted a third quarter (ended Oct. 28) loss of $11.4 million compared to a loss of $11.5 million during the same period last year.

Revenues for the Albany, N.Y.-based retailer surged 23% to almost $298 million from $241.4 million last year due to the acquisition earlier this year of bankrupt Musicland. Same-store sales (open at least one year) dropped 5%.

Total DVD sales increased 77%, driven by the acquired Suncoast stores (from Musicland) and comparable same-store sales, increased 13%.

Total video business, including VHS, increased 8% on a same-store basis and 68% overall. The category represented 37% of quarterly business, up from 27% last year.

Total music sales dropped 2% with a 14% drop in same-store sales and represented 46% of total sales, compared to 58% last year.

Calling music downloads “a brand new business,” Trans World executives said the company would expand in-store digital music download operations by 25 locations in the fourth quarter.

With an ongoing product shift away from music to DVD, games and electronics, Trans World expects DVD sales in the fourth quarter to rival music sales at 40%, respectively.

“We are changing our product mix to better reflect the taste of our customer,” said Robert Higgin, chairman and CEO of Trans World, in a conference call.

The company expects a music upsurge in the fourth quarter driven by the release of the Beatles Love album. In DVD, Trans World expects Pirates of the Carribbean: Dead Man's Chest and The Da Vinci Code, Cars and Superman Returns, Ice Age 2 and Family Guy: Season Four to be key drivers.

In the quarter, Trans World re-branded 56 Musicland stores to FYE stores for a total of 650 FYE stores. Trans World expects to have 900 FYE stores by this time next year. It maintains 180 video only stores under the Suncoast brand.

Finally, CEO Higgins said he miscalculated the impact from the liquidation of Tower Records & Video but didn't expect the impact to be significant.

Trans World lost out on the winning $134.4 million bid for Tower by a reported $500,000.

“I think in certain geographic areas such as California, when you've got someone liquidating that amount of inventory in a short period of time, we get impact form that,” said Higgins. “I just misjudged that. But we don't know by how much. And we don't think it is a big amount.”

Higgins said Trans World would pursue acquiring an unknown number of Tower retail locations once liquidation activities are concluded in mid-December.

“We'll have some [to announce] shortly,” Higgins said. “We are waiting for the courts to confirm some locations we did buy.”

Game sales increased 37% and 8% for comparable same-store sales. Games represented 7% of quarterly sales compared to 6% last year.

Sales for electronics and boutique items increased 37%, with same-stores sales up 4%, and represented 10% of total sales compared to 9% last year. Electronics sales increased 41% with comps up 10%.

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