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Trans World Eyes Blu-ray as DVD Savior

10 Jan, 2008 By: Erik Gruenwedel

Just back from the Consumer Electronics Show in Las Vegas, Jim Litwak, president and COO of Trans World Entertainment Corp., showed little hesitation applauding Warner Bros.' decision last week to exclusively support Blu-ray Disc.

“Finally, the customer has an understanding of where this business is going to go and will not be confused,” Litwak told investors Jan. 10 during an analyst call to discuss holiday sales. “Blu-ray becomes the new DVD format, which is particularly exciting. We like that a lot.”

He said Blu-ray would help Trans World grow the DVD category in 2008.

“Frankly, we saw confusion [among HD packaged media] this whole year (in 2007),” Litwak said.

Albany, N.Y.-based Trans World, which operates the f.y.e., Suncoast, Wherehouse and Second Spin retail brands, could use the help.

Sales of music CDs and DVD movies continued to struggle at retail as Trans World reported a 12% decline in comparable same-store sales (open at least 12 months) for the nine-week holiday shopping period ended Jan. 5, compared the same period the previous year.

Comp sales in December through Christmas fared worse, falling 13% compared to last year.

Revenue for the nine-week period fell 19%, to $378 million from $469 million, while revenue for the five-week period plummeted 24%, to $269 million from $368 million last year.

Revenue was generated by 14% fewer total stores (138) than last year.

As a result, officials said they expect the company to post a loss from $15 million to $20 million for fiscal 2007.

The company had previously projected breaking even.

“Holiday sales were well below our expectations,” said Robert Higgins, chairman and CEO.

Higgins, who is among separate shareholders attempting to acquire Trans World and take it private, declined comment on his $5-per-share cash bid before a special committee created by the board of directors.

Litwak said the primary culprit for the poor results was music, which saw a 28% drop in comp store sales. DVD sales fell 7%, video games increased 6%, and electronics and boutique items rose 9%.

Movie DVD sales represented 42% of Trans World revenue, compared to 41% last year. Litwak said the decline in DVD sales was due to a dearth of new releases during the period and lower prices on catalog fare.

“To give you a feel, Top 50, which tends to drive the DVD category, was down 12%,” he said.

Music CDs represented 33% of revenue, compared to 39% last year. Litwak said a lack of “good product” and lower demand resulted in 29% drop among the top 50.

“The lack of new hits in the fourth quarter was just astounding,” Litwak said.

John Sullivan, EVP and CFO, said Trans World had expected a low single-digit comp-store sales decline after seeing improvements during the previous three quarters.

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