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Not-So-Happy Holiday at Trans World

5 Jan, 2006 By: Holly J. Wagner

Trans World Entertainment Corp. will rely less on hits and more on unique in-store promotions to improve sales after a bruising holiday season that saw comp store sales slide 8 percent compared to the comparable nine-week period last year, executives said.

“Our strategy going forward is not to rely on new releases,” said president Jim Litwak.

Comps were down 15 percent in music, 2 percent in video and 6 percent in video games year-overyear for the nine weeks, chairman and CEO Robert Higgins said. Mall stores had a 7 percent decrease and freestanding stores were down 11 percent. The company operated 798 stores this year, compared to 851 stores last year.

“This is the softest holiday sales performance I have seen, and it impacted all three of our core categories: music, video and video games,” he said.

Although the DVD category didn't suffer as much as music and games, executives said new-release sales were down. “[The sales strength] was in the catalog, and it was really driven by TV on DVD,” Litwak said. “A lot of that was not Top 50 product.”

Surprise performers among new DVD releases in the quarter were Madagascar and The 40-Year-Old Virgin, with Wedding Crashers turning in strong sales this week, Higgins said. Star Wars: Episode III — Revenge of the Sith, Mr. & Mrs. Smith and Fantastic Fourdidn't do as well as expected, he said.

Price erosion is fueling the pinch.

Among the chain's top 50 selling DVDs — which normally account for about 20 percent of sales in the category — unit sales were down 19 percent and revenue was down 64 percent, Higgins said.

The company will change its strategy and do more to appeal to various customer segments to increase sales, Litwak said.

“Our Latin music and movie business grew by more than 20 percent this quarter," Litwak said. "That really strengthens our thoughts that segmentation is working in Latin and can be expanded to other areas.”

“Despite a very tough release schedule, DVD performed fairly well," he said. "We saw that there were opportunities in genres that we have barely begun to scratch the surface on. TV on DVD is one of those, we really own that market. Now we're thinking of ourselves more as an entertainment company.”

The used-product category also is booming, with 20 percent comp-store growth for the period, Litwak said, although he did not break out sales by product category.

The chain's Backstage Pass loyalty program, launched in the third quarter, enrolled 60,000 members in the past two months and is up to 80,000 members, Higgins said. The program lets customers pay $25 for a card that gets a 10 percent discount on purchases.

“We're pretty pleased with what we see from the average customer in that program and what they are spending,” he said.

Higgins said the chain will pursue more music exclusives in the coming year.

“Our plans are definitely to be in that game and to have additional exclusives and be a major player in that game in the coming year,” he said.

The company also is continuing to roll out its LVS 3 listening and viewing stations in stores, and is preparing to let customers sample product that is not in the stores for special order, as well as download music to devices at the listening posts. Also, the company is working on a back-end system that will link its Internet business — up 50 percent over the holiday period — with its in-store systems.

The chain will hold its fourth-quarter financial call Feb. 23.

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