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Trans World Posts $22.3M Loss, Will Shutter 125 Stores by End of Year

19 Nov, 2009 By: Erik Gruenwedel

In recessionary times, a loss can be viewed as a gain if the percentage lost is less than the competition.

That’s the rationale Trans World Entertainment took Nov. 19 when it reported a $22.3 million third-quarter (ended Oct. 31) net loss, compared to a net loss of $28.4 million during the previous year’s comparable period.

Same-store sales (open at least 12 months) fell 9%, compared to a 14% decline last year.

Albany, N.Y.-based Trans World, which operates 690 stores (down from 786 stores last year) under the f.y.e. and Suncoast brands, and related Web properties, generated quarterly revenue of $161.4 million, down 17% from revenue of $195.2 million last year.

“Despite our overall comp decline, our three major categories [movies, music and video games] outperformed the industry,” said president and COO Jim Litwak in a call with investors.

A weak new-release schedule contributed to a drop in same-store video sales, which fell 7% compared to a 17% decline industrywide.

Strong promotions and better depth in catalog DVD titles helped counter a 17% decline in new releases. Video represented 41% of revenue unchanged from the same period last year.

Video game comp sales declined 5% (compared to 11% industry decline) and represented 8% of business revenue.

Market share for catalog music CD sales improved in the quarter with same-store sales declining 10%, compared to a 17% decline in the industry.

New releases were down 25% with music representing 37% of revenue compared to 38% last year.

Electronics and related products, which included Blu-ray players, declined 14% and represented 13% of sales compared to 14% last year.

John Sullivan, EVP and CFO, said the company opened two stores and closed nine stores in the quarter and plans to shutter 125 underperforming stores by the end of the year.

Founder and CEO Robert Higgins said the strength of fourth-quarter DVD/Blu-ray releases top last year and portend a strong end of the year.

“Despite the sales decline during the quarter, we were able to reduce our pre-tax losses through improved gross margins and control of expenses,” Higgins said.

Nonetheless, Edward Woo, retail analyst with Wedbush Morgan Securities in Los Angeles, said the quarterly results were weak and “getting” weaker.

“I think they and Blockbuster are in the same boat, so you have an idea of where the ship is heading,” Woo said.

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