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Trans World Holiday Sales 'Disappointing'

3 Jan, 2007 By: Erik Gruenwedel

Downward pricing among national retailers for top 50 DVD titles resulted in a 20% drop in same-store comparable sales (open at least a year) and 7% decline in units sold for Trans World Entertainment during the 9-week holiday shopping period in November and December.

Albany, N.Y.-based Trans World, which operates more than 1,100 entertainment retail stores, including F.Y.E., Sam Goody and Wherehouse, said overall same-store comps dropped 6% during the five-week period in December after declining 2% in November. Overall same-store comps during the period dropped 5%, compared to the same period last year.

Revenues from 1,113 stores during the holiday period increased 23% to $469 million compared to $380 million last year when Trans World operated 798 stores.

“Our sales were disappointing and well below our expectations,” said Trans World chairman and CEO Bob Higgins, in a conference call with investors.

Video same-store sales, which included DVD and VHS, dropped 2% and represented 42% of Trans World's holiday business. DVD sales were flat despite several strong new releases, including Pirates of the Caribbean: Dead Man's Chest and Talladega Nights: The Ballad of Ricky Bobby.

“Frankly, that's the big story,” said James Litwak, president and COO.

He said the company had good growth in catalog and select genre categories. The executives thought the “very strong” new release schedule, particularly in regards to the box office, during the holidays would translate into better sales.

“In 2005 we also had strong releases but we expected a better performance this year,” Litwak said.

Sales in acquired Musicland retail locations fell below expectations despite claims by Higgins that the former-bankrupt stores would improve in the future.

He blamed long-standing “unprofitable” loyalty programs for the poor results with Musicland. Higgins said Trans World failed to attract Musicland's 1 million loyalty members with its own programs, which he said has about 700,000 members.

“It took us a little longer than we thought it would to get back those customers,” he said.

Higgins said many of the acquired Sam Goody stores were not fully functional until November. He said the company this month would begin shuttering unprofitable stores across its portfolio, including some Musicland locations.

Same-store comp music sales fell 12%, which was an improvement over the 14% decline in the third quarter (ended Oct. 28). The company attributed sagging music sales to ongoing double-digit declines, lack of “good” product and lower average unit selling prices.

Music sales represented 37% of sales during the period.

The launch of new game consoles from Nintendo and Sony helped spur video game comps up 6%, and boutique and portable electronics and accessories increased 11% — despite the lack of available PlayStation 3 systems.

Higgins said the holiday results would result in Trans World posting fiscal year 2006 flat to 5 cents per share earnings compared to previous guidance of 10 cents to 20 cents per share for the year.

Higgins doubts January sales will salvage the fiscal year.

In 2007, Trans World plans to up storewide branding efforts and expand product offerings beyond music, DVD and video games to include portable media players.

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