Hastings Q1 Profit Down 62 Percent24 May, 2005 By: Holly J. Wagner
With DVD rentals in a slide that shows no sign of letting up, profit plummeted 62 percent at Hastings Entertainment in the first quarter ended April 30.
Net income was $0.8 million, or .06 cents per diluted share, for the quarter, compared to net income of $2 million, or 17 cents per diluted share, for the first quarter of 2004. Total revenue for the quarter increased $2.2 million, or 1.7 percent, to $129.1 million compared with $126.9 million for the first quarter of 2004.
“Although our net income for the quarter was below last year, it exceeded our expectations,” chairman and CEO John H. Marmaduke said. “Total merchandise revenues, which declined more significantly near the end of the quarter, were slightly below our projections. However, our total margin rate and SG&A costs were better than projected. I am particularly pleased with the operations of our distribution center and our new warehouse management system. The integration issues we have been dealing with for some time appear to be behind us, and distribution center costs for the current quarter were in line with our projections and slightly lower than last year.”
Rental comps slipped 6.2 percent, pulling down results despite a 1.5 percent increase in comp-store merchandise sales.
“Our decrease in rental comps reflects a continuing shift to purchase industrywide, an area we continue to emphasize,” said a company statement. “This rental comp does not include video for sale and video game sellthrough revenue.”
Rental revenue accounted for 18.8 percent of total revenue, down from 20.4 percent in last year's first quarter. Gross profit from rental revenue was flat at $15.3 million for the quarter. As a percentage of rental revenue, gross profit increased to 62.9 percent for the quarter compared to 59.2 percent for the same quarter in 2004, because Hastings bought fewer rental video units from the studios. That reduced depreciation, a cost included in cost of goods sold.
By merchandise category, comps included a 2.4 percent increase in sellthrough video and a 30.6 percent hike in video game sales. Book sales were off 3.4 percent and music sales were down 1.3 percent. Sidelines, including items like shoes and body jewelry, were up 7.1 percent.
Founded in 1968, Hastings operates 153 superstores, primarily in small to medium-sized markets throughout the United States, and the Web site gohastings.com.