Hastings Q4 Same-Store Sales Fall in Games, Music, Rise in CE, Movies

Hastings Entertainment said same-store sales declines in categories including videogames and music offset growth in electronics, movies and several other categories. Total same-store sales for Q4 fiscal 2010 ended Jan. 31 dipped 3.2 percent from Q4 a year ago, while revenue fell 8.9 percent to $160.5 million and profit tumbled to $3.8 million, or 43 cents per share, from $9.1 million, 94 cents.

Q4 revenue was hurt by the economic climate and inclement weather during January, said CEO John Marmaduke, as well as by its decision “to be less promotional during the holiday season.” Despite hurting revenue, he said, the decision “was a major contributor to our increase in merchandise gross margin dollars and rates."

Same-store electronics sales grew 2.3 percent from fiscal 2009, due mainly to increased sales of refurbished iPods and other MP3 players, and despite weaker sales of Blu-ray players, Hastings said. Same-store movie sales inched up 1.1 percent, due mostly to increased sales of new and used Blu-ray movies and new DVD boxed sets, and despite weaker sales of new DVDs, it said.

The widest same-store decline, by far, was in videogames, which were down 12.2 percent due mainly to weaker sales of new Wii games “resulting from low allocations of Nintendo first-party titles,” as well as lower sales of game consoles and older-generation videogames, Hastings said. The declines “were partially offset by” growth in used Xbox 360 games and new and used videogame accessories, it said. In Q4 of fiscal 2009, Sony slashed PS3 console pricing, which “led to a significant increase in sales of these consoles,” Hastings said. But it said “there was no comparable price drop during fiscal 2010, which primarily drove the decrease in console sales” in Q4 fiscal 2010.

Music same-store sales dipped 1.1 percent because of weaker sales of used CDs, only slightly offset by a small increase in sales of new CDs, Hastings said.

Rental same-store sales slipped 2.1 percent, due mostly to weaker rentals of DVDs, audio books on CD, and videogames, Hastings said. The weakness was “partially offset by increased rentals of Blu-ray movies,” it said. Same-store rental video sales fell 1.5 percent, while same-store rental videogame sales dipped 1.1 percent, it said. Hastings is “exiting” the book-on-CD category and, as a result, same-store sales in that category tumbled 99.6 percent, with units rented falling about 97.8 percent, it said. Same-store rental sales in the first two months of Q4 “were slightly better than the prior year, but January was down significantly due to severe winter storms that negatively impacted rentals in the majority of our markets,” it said.

Despite the declines, Marmaduke said he was “pleased that we were able to grow our adjusted operating income” by about 12 percent to $7.3 million. January accounted for most of the company’s decline in Q4 same-store revenue, he said. A key initiative for fiscal 2010 was the expansion of the company’s new and used comics category, he said. Hastings expanded the “comic footprint” at 126 of its stores, which he said resulted in more than $5 million in revenue for fiscal 2010, an increase of about 41 percent from fiscal 2009, he said. An initiative in which customers can rent any of more than 7,000 catalog titles for 49¢ when they bring them back the next day resulted in 20 percent revenue growth in catalog titles in Q3 fiscal 2010 and 13 percent revenue growth in Q4 fiscal 2010, he said.

Hastings is “excited about our future, and we believe our vision for Hastings becoming the consolidator for entertainment retailing is becoming reality as our competitors close stores in our markets,” Marmaduke said. More than 30 rivals closed their doors or announced their closing since Jan. 1, he said, predicting Hastings “will see profitable growth and a bigger market share as many of our competitors cease to exist."

Profit for the fiscal year tumbled to $1.7 million, 18 cents a share, from $6.9 million, 71 cents. Revenue for fiscal 2010 dipped 1.9 percent to $521.1 million. But same-store sales grew about 1.4 percent, Hastings said.

Electronics same-store sales inched up 2 percent for the year due to increased sales of MP3 players and related accessories, headphones and PC accessories, Hastings said. But it said the growth was “partially offset by lower sales of digital converter boxes, Blu-ray players and refurbished iPods.” Movie same-store sales grew 6.3 percent thanks mainly to “strong sales of new and used Blu-ray movies, DVD boxed sets and used DVDs, partially offset by lower sales of new DVDs,” it said.

Same-store videogame sales increased 4.7 percent for the year, driven by increased sales of new and used videogames for the PS3 and Xbox 360, as well as “strong sales” of videogame accessories, Hastings said. The videogame growth was “partially offset by lower sales of new” videogames for the Wii, older-generation videogames, and games for the DS and PSP, it said. The weaker Wii sales “were a direct result of low allocations of Nintendo first-party titles,” Hastings said.

Same-store music sales fell 4.8 percent for the year because of weaker sales of new and used CDs, “resulting directly from a continued industry decline and a reduced footprint in ninety-six stores,” it said. Rental same-store sales edged up 1 percent for the year, thanks mainly to “fewer promotional sales,” it said. Units rented grew 3.3 percent from fiscal 2009, while video rental same-store sales grew 2 percent, but videogame rental same-store sales fell 0.6 percent, it said.

Hastings operated three fewer superstores Jan. 31 than it did a year earlier, and also operated one concept store, Sun Adventure Sports, that opened in the last month of Q2, Hastings said. The chain closed a store in Liberal, Kan., March 15, leaving it with 145 stores, it said.