Reports Net Loss of $0.20 per Diluted Share for 3Q 2006 Compared to $0.24 per Diluted Share for 3Q 2005
AMARILLO, Texas, Nov. 20 /PRNewswire-FirstCall/ -- Hastings Entertainment, Inc. (NASDAQ:HAST), a leading multimedia entertainment retailer, today reported results for the three and nine months ended October 31, 2006. Net loss was $2.2 million, or $0.20 per diluted share, for the third quarter of fiscal year 2006 compared to net loss of approximately $2.7 million, or $0.24 per diluted share, for the third quarter of fiscal year 2005. For the first nine months of the fiscal year, net loss was approximately $0.1 million, or $0.01 per diluted share in fiscal 2006 compared to net loss of approximately $1.3 million, or $0.11 per share for the same period in 2005.
"Our financial results for the first nine months has exceeded our year-to- date forecast which has allowed us to raise our Fiscal 2006 guidance," said John Marmaduke, Chairman and Chief Executive Officer. "Our decision to increase Boutique and Electronic merchandise markdowns in the second quarter let us accelerate a new merchandising plan which contributed to improved Comp sales during the third quarter. Many of our product categories posted quarterly Comp sales which exceeded industry averages and I feel we have positioned the Company for continued revenue and income growth in the fourth quarter." Financial Results for the Third Quarter of Fiscal Year 2006 Revenues. Total revenues for the third quarter increased $5.0 million, or 4.4%, to $119.6 million compared to $114.6 million for the third quarter of fiscal 2005. The following is a summary of our revenue results (dollars in thousands): Three Months Ended October 31, Increase/
2006 2005 (Decrease)
Percent Percent
Revenues of Total Revenues of Total Dollar Percent
Merchandise revenue $98,221 82.1% $93,581 81.7% $4,640 5.0%
Rental revenue 21,415 17.9% 21,006 18.3% 409 1.9%
Total revenues $119,636 100.0% $114,587 100.0% $5,049 4.4% Comparable-store
revenues ("Comps"):
Total 3.8%
Merchandise 4.1%
Rental 2.7% Below is a summary of the Comp results for major merchandise categories: Three Months Ended October 31,
2006 2005
Music -4.4% -2.4%
Books 2.1% -2.7%
Video for sale 16.9% -1.4%
Video games 11.1% -9.4%
Boutique -0.3% -1.7% Music Comps decreased 4.4%, which was primarily attributable to fewer premier artist CD releases as well as decreased sales of used CDs. Book Comps increased 2.1% as a result of increased sales of new release hardbacks and new and used paperbacks. Video for sale Comps increased 16.9% due to increased sales of new release DVDs, DVD box sets and used DVDs. Video game Comps increased 11.1% due primarily to increased sales of Microsoft XBOX 360 hardware and games, as well as increased sales of video game accessories.
Rental Comps increased 2.7% from the same period last year due to improved marketing initiatives and a slate of stronger box office titles. Rental Comps were boosted by DVD Movies, which increased 11.8% from the same period last year.
Gross Profit. For the third quarter, total gross profit dollars increased approximately $0.8 million, or 2.0%, to $41.8 million from $41.0 million for the same period last year, primarily as a result of increased sales. As a percentage of total revenues, gross profit decreased to 34.9% for the quarter compared to 35.8% for the same quarter in the prior year. The decrease in margin rates was primarily attributable to increases in markdowns and shrinkage.
Selling, General and Administrative expenses ("SG&A"). SG&A decreased approximately $0.3 million to $44.6 million for the current quarter compared to $44.9 million for the same quarter in the prior year. As a percentage of total revenues, SG&A decreased to 37.3% for the current quarter compared to 39.2% for the same quarter in the prior year due to improved leveraging of expenses with higher revenues.
Financial Results for the Nine Months Ended October 31, 2006 Revenues. Total revenues for the first nine months of fiscal 2006 increased $7.7 million, or 2.1%, to $374.1 million compared to $366.4 million for the same period in the prior year, resulting primarily from the opening of new superstores. The following is a summary of our revenue results (dollars in thousands): Nine Months Ended October 31,
2006 2005 Increase/
Percent Percent (Decrease)
Revenues of Total Revenues of Total Dollar Percent
Merchandise revenue $305,355 81.6% $298,483 81.5% $6,872 2.3%
Rental revenue 68,787 18.4% 67,954 18.5% 833 1.2%
Total revenues $374,142 100.0% $366,437 100.0% $7,705 2.1% Comparable-store
revenues ("Comps"):
Total 2.2%
Merchandise 2.1%
Rental 2.8% The higher merchandise Comps were primarily the result of changes in the following categories: Nine Months Ended October 31,
2006 2005
Music -6.1% -1.5%
Books 0.4% -1.6%
Video for sale 13.5% 0.3%
Video games 12.8% 10.9%
Boutique -1.9% 8.8%
Music Comps decreased 6.1%, which was primarily attributable to a weaker release schedule and fewer used CD sales compared to the same period in the prior year, partially offset by increased sales of music hardware. Book Comps increased 0.4% as a result of increased sales of used books, partially offset by decreased sales of new release hardbacks. Video for sale Comps increased 13.5% due to increased sales of new release DVDs, DVD box sets and used DVDs. Video game Comps increased 12.8% due primarily to increased sales of Microsoft XBOX 360 hardware and games, as well as increased sales of video game accessories. The Company is in the process of implementing new plan-o- gramming in our Boutique and Electronics departments, which involves selling through certain existing inventory to make room for new assortments. As a result, Boutique Comps decreased 1.9%, primarily due to decreased sales of t-shirts and footwear.
Rental Comps increased 2.8% from the same period last year due to improved marketing initiatives and a stronger slate of box office titles. Rental Comps were boosted by DVD Movies, which increased 14.3% from the same period last year.
Gross Profit. For the nine months ended October 31, 2006, total gross profit dollars increased approximately $1.7 million, or 1.3%, to $131.9 million from $130.2 million for the same period last year, primarily as a result of increased sales. As a percentage of total revenues, gross profit decreased to 35.2% for the nine months ended October 31, 2006 as compared to 35.5% for the same period in the prior year.
Selling, General and Administrative expenses ("SG&A"). SG&A decreased approximately $0.4 million to $130.2 million for the nine months ended October 31, 2006 compared to $130.6 million for the same period in the prior year. As a percentage of total revenues, SG&A decreased to 34.8% for the nine months ended October 31, 2006 as compared to 35.6% for the same period in the prior year due to improved leveraging of expenses with higher revenues.
Stock Repurchase On September 18, 2001, we announced a stock repurchase program of up to $5.0 million of our common stock. Since that time, the Board of Directors has approved additional increases in the amounts of $2.5 million on April 4, 2005; $5.0 million on March 15, 2006; and $2.5 million on October 3, 2006. During the third quarter of fiscal year 2006, we purchased a total of 262,800 shares of common stock at a cost of approximately $1,773,800, for an average cost of approximately $6.75 per share. As of October 31, 2006, a total of 1,834,463 shares had been repurchased under the program at a cost of approximately $10.7 million, for an average cost of approximately $5.83 per share. As of October 31, 2006, approximately $4.3 million remains available for repurchases under the stock repurchase program.
Store Activity Since August 21, 2006, which was the date we last reported store activity, we have had additional store activity as follows: Selling
Square
Community Type Population Footage Date Opened
Lawrence, KS Remodel 74,951 27,792 8/19/2006
Boise, ID Remodel 191,667 17,640 10/7/2006
Amarillo, TX Relocation 176,999 24,234 10/20/2006 Fiscal Year 2006 Guidance
"Our financial results for the first nine months are better than our internal forecast, which is the basis for our guidance," said Dan Crow, Vice President and Chief Financial Officer. "Additionally, we are anticipating a positive retail environment for the holiday season. Consequently, we are raising our guidance of net income per diluted share for the full fiscal year ending January 31, 2007 from $0.58 to $0.63 to a range of $0.65 to $0.70." Safe Harbor Statement Certain written and oral statements set forth above or made by Hastings or with the approval of an authorized executive officer of the Company constitute "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995. Generally, the words "believe," "expect," "intend," "anticipate," "project," "will" and similar expressions identify forward-looking statements which are not necessarily historical in nature. All statements that address operating performance, events or developments that we expect or anticipate will occur in the future, including statements regarding our future merchandise margins and our general guidance for fiscal year 2006, are forward-looking statements. Such statements are based upon Company management's current estimates, assumptions and expectations, which are based on information available at the time of this disclosure, and are subject to a number of factors and uncertainties, including, but not limited to, our inability to attain such estimates, assumptions and expectations, a downturn in market conditions in any industry, including the current economic state of retailing (relating to the products we inventory, sell or rent) and the effects of or changes in economic conditions in the U.S. or the markets in which we operate. We undertake no obligation to affirm, publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
About Hastings Hastings Entertainment, Inc. is a leading multimedia entertainment retailer that combines the sale of new and used CDs, books, videos and video games, as well as boutique merchandise, with the rental of videos and video games in a superstore format. We currently operate 154 superstores, averaging approximately 20,000 square feet, primarily in medium-sized markets throughout the United States.
We also operate http://www.gohastings.com/ , an e-commerce Internet web site that makes available to our customers new and used entertainment products. The site features exceptional product and pricing offers. The Investor Relations section of our web site contains press releases, a link to request financial and other literature and access to our filings with the Securities and Exchange Commission.
Consolidated Balance Sheets
(Dollars in thousands) October 31, October 31, January 31,
2006 2005 2006
(unaudited) (unaudited) Assets
Current Assets
Cash $ 3,072 $ 5,477 $ 3,617
Merchandise inventories, net 186,291 164,373 165,049
Deferred income taxes, current 4,105 3,322 4,234
Other current assets 6,780 6,569 7,016
Total current assets 200,248 179,741 179,916 Rental assets, net 12,615 13,223 12,606
Property and equipment, net 59,530 62,509 60,013
Deferred income taxes, non-current 2,175 2,315 1,492
Intangible assets, net 418 475 454
Other assets 118 51 180 Total assets $ 275,104 $ 258,314 $ 254,661 Liabilities and Shareholders' Equity
Current liabilities
Current maturities on capital
lease obligations $ --- $ 132 $ 94
Trade accounts payable 87,350 84,471 88,991
Accrued expenses and other current
liabilities 32,163 29,462 38,323
Total current liabilities 119,513 114,065 127,408 Long-term debt, excluding current
maturities 59,656 51,954 28,057
Other liabilities 4,263 4,769 4,503 Shareholders' equity
Preferred stock --- --- ---
Common stock 119 119 119
Additional paid-in capital 35,829 36,076 36,076
Retained earnings 61,370 54,465 61,466
Other comprehensive income 100 --- 141
Treasury stock, at cost (5,746) (3,134) (3,109)
Total shareholders' equity 91,672 87,526 94,693 Total liabilities and shareholders'
equity $ 275,104 $ 258,314 $ 254,661 Consolidated Statements of Operations
(Dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
October 31, October 31,
2006 2005 2006 2005
(unaudited)(unaudited)(unaudited)(unaudited) Merchandise revenue $98,221 $93,581 $305,355 $298,483
Rental revenue 21,415 21,006 68,787 67,954
Total revenues 119,636 114,587 374,142 366,437 Merchandise cost of revenue 70,337 65,422 216,868 212,271
Rental cost of revenue 7,499 8,116 25,399 23,978
Total cost of revenues 77,836 73,538 242,267 236,249 Gross profit 41,800 41,049 131,875 130,188 Selling, general and
administrative expenses 44,572 44,867 130,231 130,570
Pre-opening expenses 15 --- 94 92 Operating income (loss) (2,787) (3,818) 1,550 (474) Other income (expense):
Interest expense, net (900) (778) (2,304) (1,920)
Other, net 55 66 599 209 Loss before income taxes (3,632) (4,530) (155) (2,185) Income tax benefit (1,432) (1,799) (59) (879) Net loss $(2,200) $(2,731) $(96) $(1,306) Basic loss per share $(0.20) $(0.24) $(0.01) $(0.11) Diluted loss per share $(0.20) $(0.24) $(0.01) $(0.11) Weighted-average common shares
outstanding:
Basic 11,176 11,367 11,312 11,426
Dilutive effect of stock
options --- --- --- --- Diluted 11,176 11,367 11,312 11,426 Balance Sheet and Other Ratios (A)
(Dollars in thousands, except per share amounts) October 31, October 31, January 31,
2006 2005 2006
Merchandise inventories, net $186,291 $164,373 $165,049
Inventory turns, trailing
12 months (B) 1.74 1.84 1.83 Long-term debt $59,656 $51,954 $28,057
Long-term debt to total
capitalization (C) 39.4% 37.2% 22.9% Book value (D) $91,672 $87,526 $94,693
Book value per share (E) $8.10 $7.66 $8.11 Three Months Ended Nine Months Ended
October 31, October 31,
2006 2005 2006 2005
Comparable-store revenues (F):
Total 3.8% -4.5% 2.2% -1.8%
Merchandise 4.1% -3.1% 2.1% 0.0%
Rental 2.7% -10.1% 2.8% -8.8%
(A) Calculations may differ in the method employed from similarly titled
measures used by other companies. (B) Calculated as merchandise cost of goods sold for the period's
trailing twelve months divided by average merchandise inventory over
the same period. (C) Defined as long-term debt divided by long-term debt plus total
shareholders' equity (book value). (D) Defined as total shareholders' equity. (E) Defined as total shareholders' equity divided by weighted average
diluted shares outstanding as of period end. (F) Stores included in the comparable-store revenues calculation are
those stores that have been open for a minimum of 60 weeks. Also
included are stores that are remodeled or relocated during the
comparable period. Sales via the Internet, as well as coupons, are
not included, and closed stores are removed from each comparable
period for the purpose of calculating comparable-store revenues. DATASOURCE: Hastings Entertainment, Inc.
CONTACT: Dan Crow, Vice President and Chief Financial Officer of Hastings Entertainment, Inc., +1-806-677-1422 Web site: http://www.gohastings.com/
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