Trans World Entertainment Eyes Q4 Retail Rebound, Digital Decline

In a reversal of industry trends, Trans World Entertainment Corp. March 28 reported a 2.8% increase in fourth-quarter (ended Feb. 2) same-store sales in its f.y.e. (For Your Entertainment) mall-based packaged media retail stores.

At the same time, Etailz.com, the online retail subsidiary TWMC acquired in 2016 for $75 million, reported a $62 million loss from operations, which involved a $57 million impairment charge related to company restructuring and 30% workforce reduction – including some senior management.

“This [2.8%] marked the second consecutive quarter of positive [f.y.e.] comp sales,” CEO Mike Feurer said in a statement. “Our customers continue to respond positively to the changes in our merchandise assortment and presentation that were made to counter declining mall traffic and the ongoing declines in physical media.”

Indeed, f.y.e., which operates more than 200 stores nationwide, has been pushing trend items, including collectibles, action figures, posters, T-shirts and related merchandise.

Regardless, store revenue dropped 15% to $78.8 million from $92.4 million from the previous-year period. Operating loss narrowed to $1 million from a loss of $2.4 million during the previous-year period.

Fiscal-year store revenue declined 14% to $231.2 million from $268.3 million during the previous-year period.

Meanwhile, Spokane, Wash.-based Etailz, which helps third parties monetize online sales through platforms such as Amazon, Walmart.com and eBay, posted revenue of $48.6 million, down almost 9% from revenue of $53 million last year.

For the year, revenue increased 7% to $186.9 million from $174.4 million.

“In response to the decline in operating results, we’ve engaged outside support and initiated certain strategic changes to create operational efficiencies directed towards improving [Etailz’s] performance and cash flow,” said Feurer. “We remain confident in the underlying opportunity afforded by etailz as a top marketplace retailer and service provider.”

Trans World Entertainment shares closed up 5.5% at 47 cents per share on March 27.

 

 

Trend’s Tricky Retail Slope

NEWS ANALYSIS — GameStop, along with other entertainment retailers, is attempting to sustain its national retail footprint in part by selling popular culture items such as action figures, posters, T-shirts and other collectibles.

It’s a business strategy fraught with risk and reward.

GameStop’s collectibles business increased 24.4% to $142.4 million in its most-recent fiscal period, driven by continued expansion of licensed merchandise offerings and unique product offerings.

Trans World Entertainment Corp.’s f.y.e. chain reported a 3% increase “lifestyle” sales, which partially offset a 17% decline in video, music and video games.  The lifestyle category represented 49.5% of revenue for the quarter, up from 42% a year ago.

“We are focused on efforts to differentiate our entertainment merchandise towards creating a unique specialty retailing experience of choice for families and fans of pop culture,” CEO Mike Feurer said on the company’s May 29 fiscal call.

Feurer said the changing merchandise point-of-view at f.y.e. is based in part on reinforcing the chain’s credibility with customers, while enabling it to better connect “personally with welcomed frequency.”

Maybe, but retail chains Hastings Entertainment and MovieStop tried similar approaches focusing on trend merchandise and failed.

Acquired in 2014 by the company that runs Elvis Presley’s Graceland estate, as well as Prince’s pending Paisely Park in Minneapolis, Hastings and MovieStop turned their focus away from home video to consumables, trend, comics, electronics, hobbies and books. Hastings said it generated $100 million annually in book sales.

“We are hopeful that we are on the right path,” Jim Litwak, president of the combined companies, said at the time.

He wasn’t on the right path. Both chains halted operations in 2016, shuttering a combined 162 stores nationwide.

But Michael Pachter, media analyst with Wedbush Securites in Los Angeles, contends GameStop can succeed with trend.

“The real difference is that the core customer for GameStop is an almost perfect overlap with the core memorabilia collector,” said Pachter. “The foot traffic provides a cross-selling opportunity.”

The analyst cautioned the trend category is significant for GameStop but not a gamechanger. He said collectibles generated 7% of total sales in 2017, with 9% projected for this year.

“That seems sustainable,” Pachter said.