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Trans World Entertainment Eyes Best Buy’s Shrinking Disc Shelf Space

23 May, 2013 By: Erik Gruenwedel

Parent of f.y.e. retail chain cites Best Buy’s declining interest in packaged media as a growth opportunity to deliver high gross margins in product categories such as Blu-ray Disc

Best Buy’s indifference toward packaged media represents a golden opportunity for Trans World Entertainment’s f.y.e. (For Your Entertainment) chain of retail stores, according to CEO Bob Higgins.

In a May 23 fiscal call, Higgins said the retailer of 353 f.y.e. stores and handful of Second Spin used product locations (and related websites) continues to pick up the slack in disc sales created by other chains reducing their exposure to the category.

“Video sales continue to be driven by strong sales of Blu-ray as competitors exit the DVD business, and the strength and depth of our [disc] selection provides us with a competitive advantage,” Higgins said.

The CEO cited Best Buy’s recent decision to curtail shelf space for packaged media (opting instead for higher visibility of its CinemaNow digital platform) as an opportunity for f.y.e., beginning in the second quarter.

“We’ve always considered [Best Buy] our No. 1 competitor [in packaged media]. We didn’t get any impact in the last quarter, but I would expect that in the future we will,” Higgins said.

Meanwhile, Trans World Entertainment reported first-quarter (ended May 4) net income of $1.6 million, compared with net income of $2.8 million during the previous-year period.

Albany, N.Y.-based Trans World said revenue fell to less than $94 million from $112 million, due in part to the company operating 26 fewer stores in the quarter. Trans World opened two new locations while closing seven others.

Same-store sales dropped 6.6%, due in large part to less foot traffic and weak sales in music and electronics. Video sales, which include DVD and Blu-ray Disc, were flat and represented 47% of overall revenue, compared with 43% last year.

Notably, gross margins increased 90 basis points to 38.1% of sales, compared with 37.2% last year. Trans World attributed the increase to high margins among most of its product categories.

Same-store music CD sales dropped 16%, representing 30% of revenue compared with 33% last year. Trend sales increased 10%, representing 10% of overall sales compared with 8% last year. Electronics decreased 18%, which was due in part to less year-over-year promotional activity in the headphone category.

“We continue to see electronics as a growth opportunity for the company,” Higgins said. “One of our key initiatives for 2013 is to improve our assortment and customer shopping experience in portable electronics, which will be rolled out in the majority of our stores by the end of the second quarter.”

Electronics represented 9% of total sales compared with 11% last year. Video game sales dropped 7%, representing 4% of revenue compared with 5% last year.

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