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Trans World Posts Drop in Sales

9 Mar, 2006 By: Jessica Wolf

Weakness in games, music and DVD sales resulted in lower financials at Trans World Entertainment for the fourth quarter of 2005.

Comp store sales were down 8% for the quarter and 6% for the year. A 5% lower company-store count led to a drop of overall sales in the fourth quarter. Total sales decreased 11%, to $458.6 million, in the fourth quarter and decreased 9%, to $1.2 billion, for the year. Net loss for the year was $1.4 million.

For the first quarter of 2006, the company expects a net loss per share in the range of $0.25 to $0.30, but executives declined to give further guidance due to Trans World's pending acquisition of Musicland.

Trans World chairman and CEO Robert Higgins said the company expects to close the Musicland acquisition on or about March 27. The sale hearing is March 22.

Thanks to the Musicland deal, “we expect to be in a very strong cash position by the end of the year,” Higgins said.

Meanwhile, the company is coming off of its “softest holiday sales season in the video, music and games categories” he said.

Music sales were down 14% in the fourth quarter of 2005, video was down 2% and games were down 3%.

Top sellers at the chain from the fourth-quarter DVD slate included The 40-Year-Old Virgin, Wedding Crashers, Mr. & Mrs. Smith and “Family Guy.”

But these couldn't match up with prior year titles such as Shrek, Spider-Man 2 and Harry Potter and the Prisoner of Azkaban, Higgins said.

The top 50 DVD sellers make up 20% of DVD sales at Trans World, he said. In 2006 the company plans to shift in-store DVD merchandising to a greater focus on bestsellers, he said.

The used business continued to be a high point in 2005, Higgins said, and the company is planning to put more resources into that segment in 2006.

“We're going to have a great year in [used],” he said.

For DVD, the company will be looking to capitalize on TV DVD product, anime and World Wrestling Entertainment titles, as well as beefing up selections in independent film, BBC-related titles and “revitalizing” it's supply of family releases, Higgins said.

Another bright spot for the quarter and year was a growth in sales in the company's electronics, accessories and boutique items, he said.

Trans World will continue to refine its mix of DVD players, mobile phones, MP3 players and accessories this year, Higgins said.

Store sales by category were 47% music for the fourth quarter, 54% for the year; video, 34% for fourth-quarter and 30% for the year; electronics and accessories, 9.6% for the quarter and 8.8% for the year.

The company expects the PS3 launch later this year to spark the game category, Higgins said.

Microsoft's Xbox system performed well last year but “a lack of sufficient product negatively affected the category as a whole,” Higgins said.

Trans World Entertainment operates nearly 800 retail stores in 46 states, the District of Columbia, the U.S. Virgin Islands and Puerto Rico, including mall stores under the f.y.e brand and freestanding locations under the names Coconuts Music and Movies, Strawberries Music, Wherehouse, Spec's and Second Spin.

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