Music Still a Sour Note at Trans World6 Mar, 2008 By: Erik Gruenwedel
The freefall of CD music sales continued to wreak havoc for Trans World Entertainment Corp.
The chain posted a Q4 (which ended Feb. 2) 2007 loss of $66 million, compared to profit of $37.8 million during the same period the previous year. Revenue topped $451 million, down $135.2 million from $586.7 during the same period the previous year.
The loss included a $30.7 million impairment charge — an accounting term for writing off goodwill.
Albany, N.Y.-based Trans World operates the For Your Entertainment (f.y.e.), Suncoast and Second Spin retail chains, in addition to several Web sites.
In a conference call with investors, founder and CEO Robert Higgins said incremental improvements in same-store sales (open at least 12 months) vanished in the fourth quarter, when music sales plummeted dramatically.
“Declines in music continued at a far faster pace than we had expected, and the economy grew weaker,” Higgins said.
The executive said Trans World is attempting to move away from music retail and become an overall entertainment destination.
“The transition to a full entertainment retailer is taking longer than expected,” Higgins said.
Same-store music sales declined 28% while DVD comp sales fell 6%, compared to the previous year. Comp sales increased 9% in video games and 11% in other categories, which included electronics, accessories and trend items.
“We saw a poor result in new releases as well as the continued decline of the music category overall,” said Jim Litwak, president and COO of Trans World.
Sales of the company's top 50 music titles decreased 35%, while sales of the top 50 DVDs declined 12%.
Music comp sales dropped 23% and represented 39% of revenue, compared to 46% in 2006. Comp sales in DVD increased 1% and represented 39% of business, up from 36% in 2006.
Video game comps were up 8% and represented 9% of revenue, up from 8% last year. Electronics, trends and accessories increased 14% and represented 13% of revenue, compared to 10% in 2006.
Higgins said a special committee established by the board to review third-party acquisition offers — including his own $5-per-share cash offer to take Trans World private — continued to operate.
“In light of the challenging macro environment and tighter credit markets, the time table has been extended,” he said.Total annual sales decreased 14% to $1.27 billion, compared to $1.47 billion the previous year, underscored by 8% same-store sales decreases.