Bad economy pushes Hastings Q3 into red
DVD down 5% on light slate
By Susanne Ault -- Video Business, 11/17/2008
NOV. 17 | Hastings Entertainment suffered a fiscal third-quarter loss, which the chain blamed on the troubled economy.
The retailer recorded a $3.7 million net loss for the three months ended Oct. 31. That compares to a $500,000 gain for the same period last year.
Revenue fell 6.5% to $114.3 million.
Across the board, many Hastings categories struggled, with comp-store revenue sliding for DVD, videogames and music. DVD, plagued by a light third-quarter slate, according to chain management, fell by the smallest margin of these three, down 5%.
Videogame performance, which slipped 14.8%, was hurt by tough comparisons to last year’s record-breaking release of Halo 3. Music decreased 19.5%, a loss Hastings attributed to the continuing decline of the entire CD business.
Hastings rental comps fell 13.3% due to the weak feature slate as well as competing media during the quarter, which included Olympics and presidential campaign coverage. Breaking out that result, movie rentals fell 16.6%, which was offset by a 15% uptick for game rentals.
Bright spots for Hastings include its trend and electronics categories, which lifted 21.7% and 12.7%, respectively. Trend was boosted by strong sales of Webkinz plush toys, as well as healthy seasonal sales for Halloween-related merchandise. Electronics was robust due to the popularity of digital converter boxes, necessary for the February 2009 broadcasting switch to digital signals.
Elsewhere, books and Hastings café service jumped 1% and 7.9%, respectively.
Despite the chain’s slowdown, Hastings CEO John Marmaduke said he believes the retailer’s business is generally solid and that fourth-quarter releases will excite holiday shoppers. Additionally, Marmaduke noted that Hastings’ $100 million credit facility with Bank of America remains secure and does not expire until 2011.
“Beginning with September, changes in consumer spending have created the most difficult retail environment we have ever seen,” said Marmaduke. “Obviously, we are concerned about the fourth quarter in light of the current economic climate. However, we believe consumers will entertain themselves with books, videos, videogames and trend products. And we strongly believe the unique value proposition of our store model (buy, sell, trade or rent a vast array of products) gives us a competitive advantage in the gift giving season and beyond."
Following its soft third quarter, Hastings has nevertheless lowered its fiscal 2008 full year guidance to net earnings per share to a range of 50¢ to 55¢ for the period ending Jan. 31. The previously stated guidance forecast net earnings per share between 95¢ and $1.
“In light of the current financial crisis and the impact that it is having on consumer spending, along with the financial results for the third quarter, we are lowering our guidance,” said Dan Crow, VP and chief financial officer at Hastings. “Although we are encouraged by the expected quantity and the quality of new release movies and games, we are now estimating our fourth-quarter comp revenues to drop in the low- to mid-single digits, which compares to our original estimate of an increase in the mid-single digits.”
