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Trans World: Dead Retailer Walking?

9 Feb, 2009 By: Erik Gruenwedel


With consumer confidence decidedly shaky during the ongoing economic turbulence, Wall Street appears to be marching Trans World Entertainment Corp. off a cliff no stimulus package can cushion.

Shares of the Albany, N.Y.-based parent of the f.y.e. music and video retail chain Feb. 9 closed at 77 cents per share — a 15% drop since falling below $1 per share to 90 cents in January and representing an 82% decline in value over the past 52 weeks.

Until the Securities and Exchange Commission relaxed the rules due to the economy, if a stock fell below $1 for 30 consecutive business days, a company had 180 days to bring the stock back up to $1 for 10 business days or threat being de-listed.

Self-described by founder and CEO Robert Higgins as the last entertainment retailer standing, the 715-store chain has doggedly stuck to music CD sales despite the ongoing industry-wide migration to digital distribution.

That allegiance backfired in December when Trans World reported a comparable-store sales decrease of 14% for the nine-week period ended Jan. 3, which included the Christmas holiday.

The company last month terminated 25 employees at its corporate headquarters. It has shuttered 70 underperforming stores.

The f.y.e. stores stock an impressive selection of Blu-ray and standard-DVD titles, but total sales for the nine-week period totaled $287 million, compared to $378 million during the same period a year ago, a decrease of 24%.

Then, acting like a bank flush with federal bailout funds, Trans World’s board last October inexplicably awarded shares of restricted stock worth $900,000 to three executives as part of a 2005 incentive plan — incidentally the last time the company reported a profit.

Trans World has little more than $9 million in available cash and debt in excess of $75 million. Indeed, CFO John Sullivan remains resolute in his conviction the retailer can return from the precipice.

“Our focus is on turning the business around,” Sullivan told The Business Review. “The share price will take care of itself.”

Edward Woo, an analyst with Wedbush Morgan Securities in Los Angeles who tracks Trans World, isn’t so sure.

“The stock market doesn't have much confidence,” Woo said. “I have to admit the environment looks very tough.”

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