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Used DVDs Bolster Trans World Earnings

17 Apr, 2006 By: Jessica Wolf

Trans World Entertainment plans to play with its product mix and hone its store count this year, according to the firm's annual report.

Last year, video sales made up 30% of the chain's total sales mix, according to the report, filed Friday. Total DVD sales dipped 2.2% for the year, due mostly to a decrease in store count.

But Trans World plans to grow the category this year by adding more product and increasing square footage allocations for video. DVD brought in $352,184 for the chain last year; VHS, $19,781. Video games sales clocked in at $90,408 in 2005.

Used DVD sales were one bright spot last year for the chain, according to the report. Sales of used product grew 20% from 2004, and Trans World expects that growth to continue this year as the company “expands into the underdeveloped DVD business as well as increases promotions and in-store merchandising.”

The company is also getting into digital distribution with a major initiative this year. Already Trans World has slotted its third-generation digital-download LVS3 kiosks in 185 mall locations and plans to have all stores outfitted with the download stations in 2006. The chain expects music to be the primary sales driver for the kickoff.

Trans World also has seen boosts of late from ancillary product categories such as portable DVD players, mobile phones, MP3 players and accessories. This year, Trans World will continue to “refine the mix” of boutique and electronic categories, according to the report.

Meanwhile, Trans World expects to close about 35 locations and open 50 new stores this year. The chain shut down 47 locations, opened 19 stores and repositioned 16 stores in 2005.

One area of focus will be shoring up the f.y.e mall chain brand, according to the report. Last year, Trans World instituted a customer loyalty program, f.y.e Backstage Pass, which will continue this year.

Early in March, Trans World reported same-store sales were down 8% for the fourth quarter of 2005 and 6% for the year. A 5% lower company-store count led to a drop in overall sales during 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.

By the end of the month, the company had completed its acquisition of Musicland, garnering some attention from the financial community.

On April 10, Wedbush Morgan initiated coverage of Trans World Entertainment with a “buy” rating, setting the 12-month target price at $7.

According to the firm, Trans World is poised for healthy earnings growth this year and could see growth of 20% in the next several years.

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