June Gloom Hits Trans World11 Aug, 2005 By: Holly J. Wagner
Trans World Entertainment Corp. stock tumbled nearly 11 percent Thursday after the company announced it took a 5 percent hit in comp-store sales in the second quarter ended July 30 and has reduced guidance for the third quarter.
Echoing a by-now-familiar theme, chairman and CEO Robert J. Higgins said that after a promising May, June gloom set in.
“After positive comparable-store sales in May, we experienced a decline during the remainder of the quarter. Demand for our core categories of music, video and video games slowed in June and July,” he said.
The company's stock slipped from Wednesday's close of $9.52 per share to $8.53 in late trading after the announcement Thursday.
DVD sales were down 1 percent, CFO John Sullivan said. Including VHS, video category sales were down 5 percent, although video accounted for 27 percent of the quarter's business. Game sales were essentially flat and made up 6 percent of the quarter's business. Music accounted for 59 percent.
“The decline was driven by softness in both the music and DVD business,” Higgins said. “DVD new releases were disappointing during the quarter. Industry sales of the top 50 titles during the quarter were down 9 percent.”
Executives are pinning their hopes for the second half of the year on delayed music releases and a new version of the Xbox console. Nonetheless, they revised guidance down to between 65 cents and 70 cents a share.
“We remain on track to introduce our next-generation LVS3 (listening and viewing station 3) and Backstage Pass customer loyalty program later this year, and are working on a number of enhancements to our digital music capabilities,” Higgins said.
Total sales for the quarter were $253.1 million, down $277.2 million in the second quarter of 2004, although the company operated an average of 800 stores in the current year quarter vs. 856 in the comparable quarter last year. The company incurred a net loss of $7 million, or 21 cents per share.