Hastings Q4 DVD Sales Up, Profit Down26 Mar, 2007 By: Erik Gruenwedel
Despite 11.7% and 12.9% increases, respectively, in fourth quarter (ended Jan. 31) and fiscal year 2006 sales of new and used DVDs, Hastings Entertainment Inc. posted profit declines.
Quarterly net income for the Amarillo, Texas-based retailer fell more than 27% to $5.1 million from $7 million during the same period last year. Fiscal year profit fell more than 12% to $5 million, compared to $5.7 million last year.
Same-store sales (open at least 12 months) for the month increased 1.1% while rental comp revenue — largely undercut by soft video game rentals — dropped 1.7%. For the year, comp sales increased 1.8% while rental comps increased 0.2%.
Not surprisingly, music comp sales dropped 6.3% for the quarter; 6.2% for the year due primarily to decreased sales of new and used CDs.
Video game comp sales increased 3.4% due to strong hardware sales of the new Nintendo Wii and Sony PlayStation 3 gaming systems.
Strong promotional efforts (and declining margin rates) during the holidays increased revenues for the quarter 1.6% ($2.7 million) to $174.2 million, compared to $171.5 million last year. Fiscal year revenues increased 1.9% ($10.4 million) to $548.3 million, compared to $537.9 million last year.
Due to the declining margins, CEO John Marmaduke said he was disappointed in the financial results and blamed “specific merchandising initiatives” in the fourth quarter for the shortfall.
As a result, Marmaduke said the 154-store chain would focus on improving buying and merchandising functions in 2007, including realignment of senior management.
“We are optimistic about our outlook and believe we will be able to develop our brand and grow earnings in fiscal 2007,” said Marmaduke, in a statement.