Trans World Entertainment Corp. Shareholders Approve Reverse-Stock Split, Add Paramount Home Entertainment’s Jeff Hastings to Board

Shareholders of Trans World Entertainment, parent to home entertainment retailer f.y.e. (For Your Entertainment) and e-commerce middleman eTailz.com, have approved a 1-for-20 shares reverse stock split to satisfy Nasdaq’s $1-per-share minimum requirement.

The company’s stock, which closed July 1 at less than 27 cents per share, would be worth $5.36 per share following the maneuver.

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Separately, shareholders approved the appointment of Jeff Hastings, VP of sales and forecasting at Paramount Home Entertainment, to its board of directors.

Hastings joins the six-person board, which includes CEO Mike Feurer, Robert Marks, Michael Nahl, W. Michael Reickert and Michael Solow.

Hastings, who was put on the board nominee slate following pressure from TWEC shareholder Mark Higgins (son of late company founder Robert Higgins), previously informed the board that if elected, he could not begin his term on the board until September.

Trans World Entertainment Founder’s Son Pulls Board Slate Following Nomination of Paramount Home Entertainment’s Jeff Hastings

Mark Higgins, son of the late founder of Trans World Entertainment Corp. Robert Higgins, has withdrawn his slate of nominees to the board of directors.

The slate included Jeff Hastings, SVP, domestic sales, Paramount Home Entertainment, and Philip Knowles, former CEO of Trinity Home Entertainment and MVP Home Entertainment.

In a June 12 filing, Higgins withdrew his candidates for the June 27 shareholder meeting after TWEC — which operates the f.y.e. (For Your Entertainment) retail chain — formally added Hastings as a board nominee.

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Higgins, who owns 1.2% of TWEC outstanding shares, also said he would not vote any proxies received from shareholders.

With TWEC shares in danger of being delisted as investors weary of brick-and-mortar entertainment retail, Higgins sought to diversify the board with fresh faces from the home video industry.

 

Trans World Entertainment Corp. Board, Management Counter Mark Higgins’ Proxy Challenge

Mark Higgins, son of the late Robert Higgins who founded Tran World Entertainment Corp. and its f.y.e. (For Your Entertainment) home entertainment retail chain and related businesses, wants to shake up the company’s board of directors, among other actions.

Higgins has submitted the names of four nominees, including himself, for the six-person board.

Mark Higgins

Why? TWEC retail operations are hemorrhaging sales and widening losses as consumer indifference toward brick-and-mortar retail mushrooms.

The f.y.e. business upped 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.

Business trends at the retail level, including wholesale secular shifts in home entertainment consumption, beg for an intervention.

TWEC’s f.y.e. stores are one of the last pureplay home entertainment retail chains operating.

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As consumers shift their home entertainment habits away from transactional purchases to subscription streaming, TWEC has sought to shake up f.y.e. inventory selections.

Packaged-media product, including DVD, Blu-ray Disc and music CDs, has slowly been downsized in favor of trend and lifestyle merchandise.

While the changes have offset declining disc sales, mall-based f.y.e. stores continue to swim upstream against a current of ecommerce and free shipping.

CNBC reports that U.S. retailers in 2019 will shutter 5,994 stores, while opening 2,641, according to real estate tracking done by Coresight Research.

Data analytics firm Thasos found that foot traffic at the nation’s largest malls peaked in August 2018 and has declined since — despite efforts to up promotions and change inventory.

“If you’re selling merchandise at a loss, you can only do that for so long,” John Collins, co-founder and chief product officer at Thasos, told CNBC.

TWEC’s board and management (i.e. CEO Mike Feurer and CFO Edwin Sapienza), in a May 29 filing, say they are “deeply committed” to enhancing value for all shareholders and overseeing the company’s strategy.

“Our board is comprised of six highly qualified directors who bring expansive experience concerning retail operations, accounting and finance, management and leadership, risk assessment and corporate governance,” read the filing.

The company claims its board has “extensive knowledge” of the challenges faced in the “turbulent” physical retail and physical media industries and has been instrumental in identifying opportunities to improve results.

“The board recognizes the importance of having the right mix of skills, expertise and experience to effectively oversee the company and regularly reviews the board’s composition and its refreshment to ensure alignment with the interests of shareholders,” read the filing.

TWEC says merchandizing changes at f.y.e. have been “well received” by customers and will drive the “continued reinvention of the fye brand throughout 2019.”

Indeed, the changes have resulted in lifestyle categories accounting for 55% of revenue in 2018 as compared to 25% in 2014.

TWEC says it has implemented “strategic initiatives, operational efficiencies and other considerations” at the eTailz segment, which caters to businesses and entrepreneurs seeking to establish an ecommerce strategy.

“In the first quarter, we saw the benefits of the strategic initiatives, highlighted by improved gross margins, lower SG&A expenses and improved supply chain efficiency,” read the filing. “As a result of these initiatives, we were able to reduce cash used in operations by over $10 million for [Q1] as compared to the first quarter of 2018.”

TWEC holds its annual shareholder meeting on June 27.

Trans World Entertainment Corp. Founder’s Son Seeks Board Control

With shares of Trans World Entertainment Corp. (parent to home entertainment retailer f.y.e.) in danger of being delisted, fiscal profits plummeting into expanding losses, Mark Higgins, son of late founder Robert Higgins, wants to shake up the board of directors.

Mark Higgins

The younger Higgins, who owns 1.2% of the company’s shares, in a regulatory filing, submitted the names of four board nominees (including himself), for shareholders to vote on at the annual meeting on June 27.

Among the nominees, two home entertainment executives: Jeff Hastings, VP, sales planning and forecasting at Paramount Home Entertainment, and Philip Knowles, former CEO of Trinity Home Entertainment and MVP Home Entertainment.

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Higgins, who began working at Trans World Entertainment in 1981, served as chief merchandising officer for two years until the appointment of Mike Feurer as CEO in 2014.

Founder Robert Higgins, who died in 2017 at the age of 75, oversaw a retail operation that at its peak (2001) operated about 1,000 stores generating $1.4 billion in revenue.

TWEC currently operates about 200 f.y.e. stores, which generated an operating loss of $24.5 million on revenue of $231.2 million in the most-recent fiscal year.

Independent auditor KPMG disclosed the retailer’s primary source of liquidity involves borrowing under a revolving credit facility, and that “substantial doubt exists about the company’s ability to continue as a going concern.”

“Shareholders have suffered from an extended period of stock price decline and poor operating results that I believe warrants an overhaul in the boardroom,” Higgins wrote. “Since early 2015, shareholders have suffered nearly a complete loss of value, experiencing total shareholder returns of negative (-90%) while the company’s market capitalization has declined by over $88 million.”

While TWEC has suffered due to changing consumer home entertainment habits and declining mall-based foot traffic, Higgins puts much of the blame on Feurer.

The CEO in 2016 pushed for the $75 million acquisition eTailz.com, an ecommerce middleman operating largely through Amazon. The Spokane, Wash.-based unit generated an operating loss of $62 million in the most-recent fiscal period.

“In fiscal 2017 alone, the company incurred losses of over ($42.5) million and had earnings-per-share of negative ($1.18); yet, for the same year, Feurer was awarded a bonus of $350,000 and an additional $260,890 of incentive compensation (not to mention $203,500 more in stock and option awards),” Higgins wrote.

“I believe the company has tremendous potential and a valuable and dedicated workforce of more than 2,200 employees that can thrive with the right board and management team in place. I believe that the nominees, if elected, will bring about changes that will benefit Trans World Entertainment and its shareholders.”