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Trans World Q2 Loss Widens, But DVD Sales Grow

23 Aug, 2007 By: Erik Gruenwedel

A 7% increase in same-store (open at least a year) DVD sales couldn't help Trans World Entertainment Corp. offset awful music sales. The chain posted a second-quarter (ended Aug. 4) loss of $10.1 million, compared to a loss of $7.7 million during the same period last year.

The loss was tempered by an extraordinary gain of $100,000 due to unallocated negative goodwill, according to a regulatory filing.

DVD sales — which revolved primarily around higher margin catalog fare, including used fare at subsidiary Second Spin — represented 37% of company sales compared to 32% last year.

Combined DVD, video game, electronics, boutique and accessory sales represented 57% of revenue, up 9% from last year.

“We are encouraged by the improvement over our first-quarter same-store comp sales decline, which came from progressively better results in each month in the second quarter,” James Litwak, president and COO of Trans World, said in a call with analysts.

Same-store music sales continued to falter, down 19%, compared to 21% last year. Overall, music represented 43% of revenue, compared to 51% last year.

Trans World plans to rollout non copy-protected music downloads online and in-store kiosks similar to what Wal-Mart.com announced last week.

Robert Higgins, chairman and CEO of Trans World, said he wasn't concerned about Wal-Mart's resurgence in music downloads considering the retail behemoth's less than stellar results with them in the past.

“We don't think it will pinch into us at all,” Higgins said.

Trans World doesn't report online sales, which Litwak said did not at the moment contribute a “material amount.”

The Albany, N.Y.-based company, which operated 12% fewer f.y.e. and Suncoast video branded stores in the quarter, reported a 10% decrease in revenue to $267.3 million, compared to $298.3 million last year.

The company operated a combined 963 retail locations, compared to 1,091 stores last year. It plans to shutter another 45 to 50 stores by the end of the year.

Company executives said an additional 25 stores have been remodeled into so-called prototype locations aimed at promoting a more consumer-friendly, hands-on experience.

“Overall, we feel we have momentum going into the second half of the year, and we expect to have positive earnings for 2007,” Higgins said.

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