Hastings Says It Took Q1 Hit from Rivals’ Liquidation Sales

Lower prices than a year earlier and rivals’ liquidation sales hurt Hastings Entertainment results for Q1 through April, the chain said Monday. Profit fell to $1 million, 11 cents a share, from $1.7 million, 17 cents, a year earlier. But significant improvement in videogame comparable store sales and more modest growth in comparable store movie and electronics sales helped Hastings report a 4.9 percent uptick in total comparable store sales. Total revenue inched up 2.7 percent to $129.1 million.

Hastings has been hurt short term by competitors’ closing locations, “due to the majority of these stores running going out of business sales,” said CEO John Marmaduke. More than 60 unspecified rival stores closed in its markets during Q1, he said, pointing to “the recent announcement of the liquidation of a major chain,” presumably Movie Gallery. “Over the long term, this will have a positive impact on our rental revenue,” he said.

Videogame comparable store sales jumped 25.2 percent year-to-year in Q1 after falling 10.4 percent in the 2009 quarter. The growth was “primarily due to strong sales of new and used videogames” for the Wii, PS3 and Xbox 360 and stronger videogame hardware and accessory sales, Hastings said. The gains were only partly offset by weaker sales of videogames from prior-generation systems, it said. The strongest-selling Q1 games included Battlefield: Bad Company 2 and Dante’s Inferno from Electronic Arts, Square Enix’s Final Fantasy XIII, and Sony Computer Entertainment’s God of War 3 and Heavy Rain, Hastings said.

Electronics comparable store sales increased 4.1 percent, “primarily due to strong sales of new and refurbished iPods, MP3 players and related accessories including headphones,” Hastings said. Those gains were “partially offset by lower sales of digital converter boxes,” it said. Movie comparable store sales improved 11.1 percent, due mainly to “increased sales of new and used Blu-ray” movies, DVD boxed sets and used DVDs, Hastings said.

Categories with Q1 declines included music and rentals, Hastings said. Music comparable store sales fell 4.8 percent “due to lower sales of new and used CDs resulting from a continued industry decline as well as a reduced footprint” of the category in 27 Hastings stores, it said. However, the decline wasn’t nearly as bad as the 15.2 percent drop year-over-year to Q1 of 2009. Comparable store rental revenue fell 1.7 percent, “primarily due to lower price points,” though that was “partially offset by fewer promotions offered” by it in Q1, Hastings said. Videogame rental comparable store revenue fell 2.7 percent from Q1 last year. Movie rental comparable store revenue fell 1.3 percent.

Hastings was “pleased” with its 4.9 percent comparable store revenue increase, Marmaduke said. “Consumer spending has increased and we are cautiously optimistic about future revenue growth as the economy improves,” he said. Its new rental pricing strategy “continues to drive growth in rental units, which were up 9.7 percent,” he said. But he said the unit uptick “was not enough to offset our lower price points."

Q1 earnings were “better than” Hastings’ internal forecast, said Chief Financial Officer Dan Crow. But Hastings didn’t change its estimate for the full year, “due to continued uncertainty in the retail environment, particularly with respect to the holiday selling season,” he said. Hastings still expects to report earnings per share of 32-37 cents for the year ending Jan. 31.