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Trans World Q4 Profit Up, Same-Store Sales Down

1 Mar, 2007 By: Erik Gruenwedel

Despite a 21% drop in fourth-quarter (ended Feb. 3) same-store sales of top DVDs, Trans World Entertainment remains bullish on packaged media, especially catalog titles, company executives told investors last week.

The Albany, N.Y.-based operator of about 1,000 retail stores, including the F.Y.E., Suncoast Video and Second Spin brands, reported a 6% decline in total same-store sales, including 5% for mall-based locations and 9% for freestanding stores.

Fiscal year 2006 revenue increased 19% to $1.5 billion based on 1,000 stores, including acquired Musicland properties, compared to $1.2 billion and 800 stores in 2005.

Trans World posted quarterly earnings of $36.4 million, due to a 28% increase in revenue to $586.7 million, compared to income of $20 million and revenue of $458.6 million last year.The company doesn't delineate music, video, game and other revenue categories.

DVD comp sales for the quarter were flat, but total video comp sales declined 2% as the retailer exits the waning VHS business. Fiscal year DVD comp sales increased 6%, while overall video sales grew just 1% for the year.

DVD revenue drivers included Pirates of the Caribbean: Dead Man's Chest, Talledega Nights: The Ballad of Ricky Bobby, The Devil Wears Prada, Ice Age 2 and Cars.

Video accounted for 41% of quarterly (37% annual) revenue, up from 30% in 2005.

The company expects to see single-digit increases in combined DVD, Blu-ray Disc and HD DVD sales going forward in 2007.

“Video is growing as we make room for expanded catalog, and we will see greater [revenue] increases going forward,” said Jim Litwak, president and COO.

By contrast, music CD comp sales dropped 14% for the quarter. Music represented 44% of Trans World's overall business in 2006, compared to 54% in 2005.

“We saw poor performances in the key [music] releases as well as the continued decline of the category overall,” Litwak said.

Trans World shuttered 134 stores in the quarter.

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