Hastings Posts Weaker CE, Music Sales, But Better Games, Movies Results

Same-store sales of electronics, music and books were weaker for Hastings Entertainment in Q3 ended Oct. 31 than a year earlier. But the retailer said same-store sales of movies and videogames improved enough for total same-store sales to increase 1.3 percent. Hastings’ loss narrowed to $3.08 million, 35 cents per share, from $3.44 million, 36 cents. But the loss “was greater than our internal forecast,” said Chief Financial Officer Dan Crow. Total revenue dipped to $112.28 million from $112.34 million, merchandise revenue growing to $94.46 million from $94.43 million, but rental revenue dipping to $17.67 million from $17.90 million.

Same-store CE revenue dipped 0.4 percent from weaker sales of digital converter boxes, Blu-ray players and refurbished iPods, Hastings said. The strongest-selling CE items were headphones and iPod and PC accessories, which all did better than a year earlier, it said.

E-book readers are hurting the sale of new books, said CEO John Marmaduke. Same-store sales of books fell 6.2 percent, not as much as the double-digit decline for the book industry overall, he said. The retailer has “positioned ourselves to soften” the impact of e-books by “offering a variety of used and value books at price points that resonate well with our customers,” he said. And the retailer’s “multimedia store model allows us to adapt to changes in consumer preference,” he said. Sales of new books fell 9.3 percent from Q3 last year, but used and value book sales grew 7.8 percent, he said.

Same-store music sales fell 6.2 percent, less than the 10.4 percent decline a year earlier. The drop this time was blamed on weaker demand for new and used CDs, “resulting directly from a continued industry decline and a reduced footprint in 96 stores,” Hastings said.

Same-store videogame sales grew 6.7 percent, driven by “strong sales of new and used videogames” for the PS3 and Xbox 360, and new and used videogame accessories, Hastings said. Those sales “were partially offset by lower sales of older generation videogames, new Nintendo Wii videogames, and videogame consoles,” it said. The strongest-selling games, it said, included Fallout: New Vegas from Bethesda Softworks, Microsoft’s Halo: Reach and Fable III, Madden NFL 11 and Medal of Honor from Electronic Arts, Star Wars: The Force Unleashed II from LucasArts, Capcom’s Dead Rising 2 and Take-Two Interactive’s Mafia II.

Same-store movie sales improved 5.6 percent after falling 3.1 percent in Q3 last year. The growth was “primarily driven by strong sales of new and used DVD boxed sets and increased sales of new and used Blu-ray movies,” Hastings said. The increase in sales of boxed sets resulted from an “increased presence of boxed set promotions, increased sales of catalog boxed sets and several strong new titles that helped drive store traffic,” including the TV shows Sons of Anarchy season 2 and Dexter season 4, it said. But the retailer said it saw weakness in sales of new DVDs.

Rental sales were hurt “by a softer slate of titles released” in Q3, said Marmaduke. But same-store rental sales grew 2.2 percent from Q3 last year. The retailer’s 49-cent rental program “is making a difference,” Marmaduke said. The program, which Hastings rolled out in Q2, “continues to gain traction, as evidenced by a 20 percent revenue growth in catalog titles” in Q3, he said. And stores “located near a competitor that has closed within the last 12 months have averaged an 8 percent increase in rental sales,” he said.

Marmaduke predicted that “with the election behind us and the economy creating job growth … consumer confidence will improve in” Q4. Further, “with the closing of many competitors, we feel our focus on store execution and service will turn many first time customers into loyal customers,” he said. But Crow said the company lowered its forecast for the fiscal year ending Jan. 31 from earnings per share of 32-37 cents to 27-32 cents because of the higher-than-expected Q3 loss. It expects to report a Q4 same-store sales increase of about 1 percent, he said.