The one-two punch of rapidly declining music sales followed by a downturn in the nation’s economy pummeled Trans World Entertainment, which on Thursday posted a $99.4 million net loss for 2007.
Despite making significant gains in transforming its business model during the first three quarters of the previous fiscal year, Trans World was rattled in the fourth quarter. It was shaken by a dismal holiday season and by disappointing new releases in its increasingly important video category.
Adding to the pain for the Guilderland-based retailer during the quarter that ended Feb. 2 was the closure of 149 stores and distribution centers in Canton, Ohio, and Johnstown.
“[Last year] was a very difficult year. Our transition to a full-entertainment retailer is taking longer than expected,” Trans World Chairman and Chief Executive Officer Robert Higgins said in a Thursday conference call with analysts.
Total sales for the fourth quarter plunged 23 percent to $451.5 million while comparable store sales slid 12 percent. Trans World recorded a net loss of $66 million, which included a non-cash tax expense of $43.4 million to establish a full valuation allowance against deferred tax assets. It also included a $30.7 million non-cash impairment charge to write down certain assets.
For the 2007 fiscal year, Trans World’s net loss shot up to $99.4 million from a net income of $11.7 million the previous year. During that period, total sales decreased 14 percent to $1.27 billion and same-store sales fell 8 percent.
The 2007 fiscal year consisted of 52 weeks, compared with 53 a year earlier.
Despite the lackluster results, Higgins stood by Trans World’s strategy to distance itself from music and embrace a multitude of entertainment categories, particularly video, video games and electronics. The retailer has also focused on strengthening its flagship f.y.e. brand and enhancing consumers’ shopping experiences with better-trained staff and in-store listening devices.
“Our core strategy is still the right one,” Higgins said.
Shareholders appeared to back Higgins despite 2007’s big net loss. Trans World’s stock closed Thursday at $4.06 per share, up 1.75 percent.
Higgins also said Trans World will not relent in closing unprofitable stores, though he would not say how many might shut down this year. The company ended the 2007 fiscal year with 813 stores, 18 percent fewer than a year earlier.