Trans World expands DVD section

Falling CD sales leave chain with wider loss in first quarter

By Susanne Ault -- Video Business, 5/24/2007

MAY 24 | Despite making DVD gains, Trans World Entertainment reported a wider net loss for its fiscal first quarter.

The entertainment specialist recorded a $9.1 million net loss for the three months ended May 5. That is widened from the $7.1 million in red ink incurred during the comparable 2006 frame.

Quarterly revenue fell 1% to $286.3 million.

Trans World management blamed its performance mostly on softening CD sales. To fight back, the chain has been ramping up product offerings within its better selling categories, including DVD and electronics. DVD was also a top seller in the chain's fiscal fourth quarter.

“The first quarter was weaker than we’d like,” said Jim Litwak, president and chief operating officer at Trans World, during a Thursday conference call with analysts. “We are focused on a long-term strategy for the company, strengthening product mix by adding new categories. We’re expanding space for DVD, electronics, accessories, boutique and games. With the exception of games, we saw all of these businesses grow.”

During the quarter, Trans World increased its DVD mix by 23%, pushing home entertainment to represent 38% of its business. This is expanded from DVD equaling 31% of its revenue last year at this time.

Also, the chain fattened its electronics, boutique and accessories areas by 22%, which resulted in contributing 11% of its revenue. Last year, the category made up 9%.

Trans World’s DVD category lifted 6% in comparable store quarterly sales. Electronics, boutique and accessories climbed 11%.

“Our strength in catalog continues to drive [DVD] business,” said Litwak. “Studios recognize our ability to differentiate ourselves versus the competition through expanded assortment and depth of product.”

Merchandising revamps did not completely offset troubles in the music category, which fell 21% in comparable store sales. It made up 44% of chain business, down from 52% last year.

Music has been hurting for some time at Trans World, due to few A-list releases and the overall industry trend of falling physical CD sales.

Limited availability of next-generation consoles and software titles bit into Trans World’s videogame category, which fell 12% on a comparable store basis. It represented 7% of business, with no change from last year.

However, Trans World officials are optimistic that gaming supply will soon improve.

Overall, comparable store sales fell 10%. The chain finished the quarter operating 972 stores, versus 1,107 last year at this time.

Trans World believes its ongoing rebranding efforts will spur further growth at the chain. By second quarter, all acquired free-standing stores from its Musicland acquisition will be known as F.Y.E. Its acquired Suncoast stores remain unchanged.

“We remain committed to the goal of ensuring that F.Y.E. is a preferred destination to all things entertainment,” said Robert Higgins, Trans World CEO.

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