Trans World Seeing ‘Broad Acceptance’ of Blu-ray, CEO Says

Comparable store sales of video at Trans World Entertainment grew 3 percent in Q2 ended July 31, “driven by the performance of Blu-ray” at its f.y.e. (For Your Entertainment) and other chains, CEO Robert Higgins said. “We are starting to see broad acceptance of the format,” he said on an earnings call.

TWE plans “some build-up” in its Blu-ray titles for the back half of this year to satisfy the growing consumer demand, Higgins said: “The studios have been aggressive at building that category and also at taking down the retail price,” making it “more affordable.” Blu-ray is “going to be a good category for the holiday season,” he predicted.

The growth in video at Trans World came as the overall video industry was down 9 percent, Higgins said. But Trans World shares fell 17 cents on Thursday, a 9.77 percent drop after the company said total Q2 sales fell 18 percent from a year earlier to $135.8 million. The loss narrowed to $15.8 million, or 50 cents a share, from $17.8 million, or 57 cents. Factors causing the drop in sales included a decrease in Trans World’s store count, from an average of 705 in operation during Q2 last year to 543 this time.

Video accounted for 42 percent of Trans World’s Q2 sales, up from 41 percent a year earlier. Overall comparable store music sales dipped 3 percent and CD sales tumbled 22 percent. Music represented 38 percent of Trans World’s Q2 sales, unchanged from a year earlier. Pricing continued to fall on music and video titles, Higgins said. Trans World “successfully” tested lower music pricing at about 100 stores starting last year, and just expanded the test to 250 stores, which should improve comparable store sales in the category for the company overall, Higgins said.

Comparable store videogame sales tumbled 37 percent last quarter and that category fell to 5 percent of the company’s business from 7 percent. The game decline was “due to a reduction in the number of stores carrying games” at the company, Higgins said. Trans World eliminated the category at more than 200 stores last fiscal year, and had games at only 135 stores at the end of Q2, he said. It had 347 stores carrying games a year ago. Comparable store sales of games at the 135 stores carrying it this year fell 21 percent, Higgins said. Comparable store sales in electronics, accessories and trend increased 7 percent and the category accounted for 15 percent of its sales, up from 14 percent, it said.

The company had a cash balance of $10.5 million and no borrowings outstanding on its credit facility at the end of Q2, versus a cash balance of $7.1 million and outstanding borrowings of $28.3 million a year earlier. Inventory fell to $237.1 million, or $67 per square foot, from $320.4 million, $72 per square foot.

It’s hard to tell what impact the closures of Blockbuster stores is having on Trans World stores, in part because only about 10 percent of the ailing video rental chain’s business was probably sellthrough, Higgins said. But “You always get more benefit, no matter who it is, when they aren’t around,” he said. Higgins expects to “have a better feel as we go through the rest of the year.”

Trans World will continue to weigh more store closures of its own, but it likely won’t be able to tell which stores it intends to close until after Q4, Higgins said. Staffing at its Carson, Calif., distribution center was slashed to 32 people from 138 people, he said: “We'll run a skeleton crew” there through year-end and “then we'll close it totally.”