Trans World Entertainment: ‘Substantial Doubt’ Sustaining Operations for Another Year

Trans World Entertainment, parent to mall-based home entertainment retailer f.y.e. (For Your Entertainment), Dec. 18 disclosed it would delay the release of its third-quarter 10-Q regulatory filing to Dec. 23.

The company, which did not submit the filing with its Dec. 17 fiscal release, said it needed additional time to compile required financial data to its accountant (KPMG).

Specifically, TWEC said its primary sources of liquidity include borrowing under its revolving credit facility, tapping available cash and cash equivalents, and cash generated from operations.

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Yet f.y.e. reported an operating loss of $21.5 million, with revenue down 14.7% to $40.8 million. Comparable store sales declined 5.2% — the decline largely buttressed by gains in collectables revenue. And, the ecommerce middleman acquired in 2016 for $75 million, lost $1.4 million.

TWEC, in the filing, said the results “raises substantial doubt” about its ability to continue as a going concern for 12-month period following the Q3 fiscal period.

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The operator of more than 200 f.y.e. stores, said it hopes to improve profitability, implement a performance improvement plan for eTailz and secure additional funding, among other strategic alternatives.

F.Y.E. Retail Stores Widen Q1 Operating Loss

Trans World Entertainment Corp. May 28 said its f.y.e. (For Your Entertainment) retail chain widened first-quarter (ended May 4) operating loss to $6.1 million compared to an operating loss of $5.4 million during the previous-year period.

Revenue dropped nearly 17% to $45 million from $54 million last year.

Comparable store sales were flat as a comparable store sales increase of 7.3% in the lifestyle category offset declines in packaged media. The lifestyle and electronics categories represented 53.9% of revenue for quarter as compared to 49.5% for the same period last year.

Gross profit was $17.5 million, or 38.9% of revenue, compared to $22.3 million, or 41.2% of revenue, for the same period last year. Gross margin improved throughout the quarter as stores refreshed trend merchandise following the holiday season.

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SG&A expenses decreased $3.5 million, or 13.1%, to $23 million, or 51.2% of revenue, compared to $26.5 million, or 49% of revenue, for the same period last year.

The decline was due to fewer stores in operation and other expense saving initiatives implemented in Q4 2018.  The increase in SG&A as a percentage of revenue was due to an increase in healthcare costs and outside consulting fees.

Meanwhile,, the ecommerce middleman acquired in 2016 for $75 million, narrowed its operating loss to $1.5 million from $2.8 million last year. Revenue fell 17.5% to $35.1 million from $42.5 million last year.

Regardless of continued downward financials, threat of Nasdaq delisting company shares, and a proxy attack from the son of late founder Robert Higgins, CEO Mike Feurer remains positive on the company’s future.

“Our customers continue to respond positively to our exclusive, unique and engaging merchandise,” Feurer said in a statement. “In the eTailz segment, we saw the benefits of the performance improvement initiatives, highlighted by improved gross margins, lower SG&A expenses and improved supply chain efficiency. We were able to reduce cash used in operations by over $10 million compared to Q1 of last year.”



Trans World Entertainment Promotes Edwin Sapienza to CFO

Trans World Entertainment Corp., parent of the F.Y.E. home entertainment retail chain, disclosed in an Oct. 29 regulatory filing the promotion of veteran executive Edwin Sapienza to the vacant CFO position following Oct. 10 passing of John Anderson.

Sapienza, 48, has been secretary and treasurer at TWEC since 2012 – positions he will continue going forward. He joined TWEC as a staff accountant in 1993.

In addition to a base salary of $280,000, Sapienza received stock options to purchase 50,000 shares of common stock, in addition to 20,000 shares of restricted stock.