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Trans World Loss Widens in Q3

21 Nov, 2007 By: Erik Gruenwedel

Trans World Entertainment Corp. reported a third-quarter net loss of $14.3 million, amidst efforts by the company's founder to take the specialty retailer private.

Trans World CEO and chairman Robert Higgins, who took the company public more than 20 years ago, made an offer Nov. 9 to buy out stockholders' shares for $5 per share. Higgins and related entities own roughly 40% of the company's shares. Trans World announced Nov. 20 that a special committee has given Higgins the go-ahead to “work with prospective co-investors in connection with his nonbinding expression of interest.”

“As I'm sure you know, the company has announced my intent to acquire the shares of the company I do not already own,” Higgins said in the earnings call. “I will not personally comment on these matters.”

Sherwood Investments Overseas LTD, which owns 1.35 million shares of Trans World, called Higgins offer “grossly inadequate” and called for the company's board to seek competing offers, speculating an auction of the company would translate into more than $8 a share.

“Let us remind you that just last year Trans World paid $78.8 million for 335 Musicland stores from bankruptcy,” a Sherwood Investments letter to Higgins read. “That deal equated to $235,000 per bankrupt store, and now you are proposing to pay $161,000 per store for all the stores.”

Trans World saw total sales decline nearly 12% to $260.6 million for the third quarter (ended Nov. 3), compared to sales of $297.7 million during the same period last year, partly due to the company operating 13% fewer stores.

Higgins noted that in-store music sales were the biggest culprit.

“We continued to achieve positive, comparable store sales in home video, video games, electronics and boutique during the third quarter. However these results did not offset the decline in music,” Higgins said during the conference call.

Trans World operates 963 stores across the United States and its territories, primarily under the F.Y.E. and Suncoast brands, and online at www.wherehouse.com, www.secondspin.com and www.samgoody.com.

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