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Trans World December Sales No Gift

8 Jan, 2009 By: Erik Gruenwedel

Citing unexpected non-new releases from Eminem and 50 Cent coupled with a stronger DVD release slate last year, Trans World Entertainment Corp. Jan. 7 reported a comparable-store sales decrease of 14% for the nine-week period ended Jan. 3, 2009.

Albany, N.Y.-based Trans World operates more than 700 largely f.y.e retail stores, in addition to Second Spin and related Web sites.


For the five-week period that ended the same time, comp-store sales decreased 12%. Total sales for the nine-week period totaled $287 million, compared to $378 million during the same period a year ago, a decrease of 24%.


Total sales for the five-week period decreased 22% to $206 million, compared to $264 million last year. During the nine-week period, Trans World operated 18% fewer stores than last year.


Company officials cited industry wide declines in music CD sales, video and the overall economic environment.


“Sales for the holiday season were well below our expectations,” said Robert Higgins, chairman and CEO, in a call with investors. “With this season’s holiday sales being lower than our expectations, we now anticipate EBITDA for the fourth quarter of $15 to $20 million with an annual EBITDA loss for fiscal-2008 in the range of $20 million to $25 million.”


The retailer previously issued annual guidance from $10 million to $15 million.

“Our promotional strategy was not enough to upset the impact of a difficult economy, two major snow storms and very late consumer shopping,” said Jim Litwak, president of the company.


The music category declined by 22% and represented 32% of revenue, compared to 33% of revenue last year. December comp sales were a negative 21% versus 25% in November.


The top 50 items in music were down 19%, and although the performance was better than the year-to-date trend, top music was hurt by a series of release delays by big names artists such as U2, Dr. Dre, Eminem and 50 Cent.


“The category performed well with releases from Taylor Swift, Britney Spears, Kanye West, Beyoncé and Nickelback, [but] the shift of other big acts clearly hurt the business,” Litwak said.


Comp video sales declined 9% and represented 43% of the business versus 42% last year. Comp video sales were down 8% in December versus an 11% decline in November. The top 50 videos fell 17%.


Although sales of The Dark Knight and Momma Mia! were exceptionally strong, they could not cover the revenue generated last year by Spider-Man, Pirates of the Caribbean: At World’s End, Harry Potter and the Order of the Phoenix, Superbad, The Bourne Ultimatum, The Simpsons Movie, Shrek, Live Free or Die Hard, Hairspray and High School Musical 2.


“Strong sales of TV on DVD helped spur catalog DVD sales. Blu-ray sales improved significantly, although the overall business is still relatively small,” Litwak said. “We believe the format will grow substantially in 2009 as hardware penetration increases.”


Game sales declined 16%, reflecting a 39% drop in Top 50 game mix, and represented 11% of the business. November comp game sales plummeted 29%, compared to 8% in December.


Electronics, accessories and trend sales declined 8% and represented 16% of revenue versus 15% last year. December comps fell 6% versus 13% in November.


A better mix in music catalog, greater depth in DVD catalog and the emergence of Blu-ray are projected to improve results in video and other categories, according to Litwak.


“While the economy will be a big factor in 2009, with strong value offerings as well as timely lifestyle promotions, we should be fine,” he said.


The rosy projection brought the ire of one investor on the call, who lamented that other than the hundreds of thousands of dollars paid to executives, investors had been given little to reward their ongoing patience for the sinking chain.


Higgins, Litwak and CFO John Sullivan declined further comment.


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