Trans World Entertainment Announces Third Quarter Results
December 12 2018 - 7:30AM
Trans World Entertainment Corporation (Nasdaq: TWMC) today reported
financial results for its third quarter and thirty nine weeks ended
November 3, 2018.
“For the fye segment, the steps we’ve taken,
including changes in our merchandise assortment and presentation,
to counter declining mall traffic and the ongoing declines in
physical media are beginning to generate a positive response from
our customers as we delivered a comparable store sales increase of
3.8% for the quarter,” commented Mike Feurer, Company CEO. “For
etailz, sales increased 8% and represented 48% of our total revenue
for the quarter, as compared to 44% for the same period last year.
Our positive top line growth was offset by lower gross margins for
both segments and higher SG&A expenses in the etailz
segment. Although meaningful headwinds will continue, we have
made real progress in our efforts to differentiate our position in
this challenging retail environment," continued Mr. Feurer.
Third Quarter Overview
Consolidated
- Total revenue decreased 1.1% to
$92.0 million compared to $93.0 million in the third quarter of
fiscal 2017.
- Net loss was $14.1 million, or
$0.39 per share, for the 13 weeks ended November 3, 2018, compared
to a net loss of $8.1 million, or $0.22 per share, for the same
period last year.
- Loss from operations was $13.8
million compared to an operating loss of $8.1 million for the third
quarter of fiscal 2017.
- Adjusted EBITDA (a non-GAAP
measure) was a loss of $10.7 million compared to a loss of $3.6
million for the third quarter of fiscal 2017 (see note 1).
- Cash, cash equivalents and
restricted cash as of November 3, 2018 was $14.6 million, compared
to $16.2 million as of October 28, 2017.
- Borrowings under the credit
facility at the end of the third quarter were $27.4 million
compared to $5.0 million at the end of the third quarter last
year.
- Inventory was $131.3 million at the
end of third quarter of 2018 as compared to $144.8 million at
the end of the third quarter of 2017.
Thirty-nine weeks ended
November 3, 2018
Overview – Consolidated
- Total revenue for the thirty-nine
weeks ended November 3, 2018 decreased 2.2% to $290.8 million,
compared to $297.4 million for the same period last
year.
- Net loss was $31.7 million, or
$0.87 per share, for the thirty-nine weeks ended November 3, 2018,
compared to a net loss of $10.1 million, or $0.28 per share, for
the same period last year. During the thirty-nine weeks ended
October 28, 2017, the Company recorded an $8.7 million, or $0.24
per diluted share, gain on insurance proceeds from Company owned
life insurance policies on the former Chairman.
- Loss from operations was $31.3
million compared to an operating loss of $18.7 million for the
thirty-nine weeks ended October 28, 2017.
- Adjusted EBITDA (a non-GAAP
measure) was a loss of $21.5 million compared to a loss of $7.0
million for the thirty-nine weeks ended October 28, 2017 (see note
1).
Segment Highlights
|
Thirteen Weeks Ended |
|
Thirty-nine Weeks Ended |
($ in thousands) |
November 3, 2018 |
October 28, 2017 |
|
November 3, 2018 |
October 28, 2017 |
Total
Revenue |
|
|
|
|
|
fye |
$ |
47,865 |
|
$ |
52,105 |
|
|
$ |
152,473 |
|
$ |
176,006 |
|
etailz |
|
44,119 |
|
|
40,896 |
|
|
|
138,288 |
|
|
121,440 |
|
Total
Company |
$ |
91,984 |
|
$ |
93,001 |
|
|
$ |
290,761 |
|
$ |
297,446 |
|
|
|
|
|
|
|
Gross
Profit |
|
|
|
|
|
fye |
$ |
18,276 |
|
$ |
21,347 |
|
|
$ |
61,181 |
|
$ |
73,342 |
|
etailz |
|
9,110 |
|
|
10,234 |
|
|
|
30,066 |
|
|
29,714 |
|
Total
Company |
$ |
27,386 |
|
$ |
31,581 |
|
|
$ |
91,247 |
|
$ |
103,056 |
|
|
|
|
|
|
|
SG&A |
|
|
|
|
|
fye |
$ |
26,620 |
|
$ |
26,790 |
|
|
$ |
79,212 |
|
$ |
84,102 |
|
etailz |
|
11,467 |
|
|
8,359 |
|
|
|
33,537 |
|
|
25,926 |
|
Total
Company |
$ |
38,087 |
|
$ |
35,149 |
|
|
$ |
112,749 |
|
$ |
110,028 |
|
Loss From
Operations |
|
|
|
|
|
fye |
$ |
(9,493 |
) |
$ |
(7,858 |
) |
|
$ |
(21,495 |
) |
$ |
(17,703 |
) |
etailz |
|
(4,261 |
) |
|
(253 |
) |
|
|
(9,808 |
) |
|
(966 |
) |
Total
Company |
$ |
(13,754 |
) |
$ |
(8,111 |
) |
|
$ |
(31,303 |
) |
$ |
(18,669 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
of etailz Loss from Operations to etailz Adjusted (Loss) Income
From Operations |
|
|
|
|
|
etailz
loss from operations |
$ |
(4,261 |
) |
$ |
(253 |
) |
|
$ |
(9,808 |
) |
$ |
(966 |
) |
Acquisition related amortization expense |
|
972 |
|
|
969 |
|
|
|
2,915 |
|
|
2,905 |
|
Acquisition related compensation expense, net of contingency
benefit |
|
750 |
|
|
1,118 |
|
|
|
2,991 |
|
|
1,708 |
|
etailz
adjusted (loss) income from operations |
$ |
(2,539 |
) |
$ |
1,834 |
|
|
$ |
(3,902 |
) |
$ |
3,647 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter Overview -
etailz
- Revenue for the third quarter was
$44.1 million, a 7.9% increase as compared to the third quarter of
2017. etailz revenue contributed 48.0% of total consolidated
revenue during the quarter as compared to 44.0% for the same period
last year.
- Gross profit for the third quarter
was $9.1 million, or 20.6% of revenue, as compared to $10.2
million, or 25.0% of revenue, for the same period last year.
The decrease in gross profit as a percentage of sales was due to
increased warehousing and fulfillment fees.
- Selling, general and administrative
(“SG&A”) expenses, before acquisition related compensation
expenses, for the third quarter were $11.5 million, or 26.0% of
revenue, compared to $8.4 million, or 20.4% of revenue, for the
same period last year. The increase in SG&A expenses was
due to higher marketplace commissions and investments in product
identification and sourcing, technology, and diversification.
In addition, last year’s third quarter SG&A expenses were
offset by income from a joint venture in the amount of $0.9
million.
- etailz loss from operations was
$4.3 million for the third quarter versus $0.3 million for the same
period last year.
- etailz adjusted loss from
operations (a non-GAAP measure) was $2.5 million for the third
quarter of fiscal 2018 compared to income of $1.8 million for the
third quarter of fiscal 2017 (see note 1).
Thirty-nine weeks ended
November 3, 2018 Overview –
etailz
- Revenue for the thirty-nine weeks
ended November 3, 2018 was $138.3 million, a 13.9% increase as
compared to the same period in fiscal 2017. etailz revenue
contributed 47.6% of total consolidated revenue during the
thirty-nine weeks ended November 3, 2018 as compared to 40.8% in
the same period last year.
- Total gross profit for the
thirty-nine weeks ended November 3, 2018 was $30.1 million, or
21.7% of revenue, compared to $29.7 million, or 24.5% of revenue,
for the same period last year.
- SG&A expenses, before
acquisition related compensation expenses, for the thirty-nine
weeks ended November 3, 2018 were $33.5 million, or 24.3% of
revenue, compared to $25.9 million, or 21.3% of revenue, for the
same period last year. The increase in SG&A expenses was
due to higher marketplace commissions and investments in product
identification and sourcing, technology, and diversification.
In addition, last year’s SG&A expenses for the thirty-nine
weeks ended October 28, 2017 were offset by income from a joint
venture in the amount of $1.0 million.
- etailz adjusted loss from
operations (a non-GAAP measure) was $3.9 million for the
thirty-nine weeks ended November 3, 2018, compared to income of
$3.6 million for the same period last year (see note 1).
Third Quarter Overview -
fye
- Revenue declined 8.1% for the fye
segment. The decline in revenue resulted from a 15.3% decline
in total stores in operation offset by a 3.8% increase in
comparable store sales compared to the same quarter last year.
- Gross profit for the third quarter
was $18.3 million, or 38.2% of revenue, compared to $21.3 million,
or 41.0% of revenue, for the same period last year.
- SG&A expenses decreased $0.2
million, or 0.6%, for the third quarter to $26.6 million, or 55.6%
of fye revenue, compared to $26.8 million, or 51.4% of fye revenue,
for the same period last year. The decline in SG&A
expenses was due to fewer stores in operation. The increase in
SG&A as a percentage of revenue was due to an increase in
healthcare costs and corporate overhead expenses.
- The fye segment recorded an
operating loss of $9.5 million for the 13 weeks ended November 3,
2018, compared to an operating loss of $7.9 million for same period
last year.
- As of November 3, 2018, fye segment
inventory was $76 per square foot, same level as last year.
Thirty-nine weeks ended
November 3, 2018
Overview – fye
- For the thirty-nine weeks ended
November 3, 2018, revenue decreased 13.4% to $152.5 million,
compared to $176.0 million for the same period last year.
- Gross profit for the thirty-nine
weeks ended November 3, 2018 was $61.2 million, or 40.1% of
revenue, compared to $73.3 million, or 41.7% of revenue, for the
same period last year.
- For the thirty-nine weeks ended
November 3, 2018, SG&A expenses decreased $4.9 million, or 5.8%
to $79.2 million compared to $84.1 million in the comparable period
last year. As a percentage of revenue, SG&A expenses were
52.0% versus 47.8% for the same period last year. The decline in
SG&A expenses was due to fewer stores in operation.
The increase in SG&A as a percentage of revenue was due
to the comparable stores sales decline of 4.3%.
- The fye segment recorded an
operating loss of $21.5 million for the thirty-nine weeks ended
November 3, 2018, compared to an operating loss of $17.7 million
for same period last year.
Trans World will host a teleconference call
Wednesday, December 12, 2018, at 10:00 AM ET to discuss its
financial results. Interested parties can listen to the
simultaneous webcast on the Company's corporate website,
www.twec.com.
TRANS WORLD ENTERTAINMENT
CORPORATIONCondensed Consolidated Financial Results
STATEMENTS OF
OPERATIONS: |
|
|
|
|
|
|
|
|
|
(in thousands, except
per share data) |
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Thirty-nine Weeks Ended |
|
November 3, |
% to |
October 28, |
% to |
|
November 3, |
% to |
October 28, |
% to |
|
2018 |
Revenue |
2017 |
Revenue |
|
2018 |
Revenue |
2017 |
Revenue |
|
|
|
|
|
|
|
|
|
|
Net sales |
$ |
90,877 |
|
|
$ |
91,817 |
|
|
|
$ |
287,148 |
|
|
$ |
293,482 |
|
|
Other revenue |
|
1,107 |
|
|
|
1,184 |
|
|
|
|
3,613 |
|
|
|
3,964 |
|
|
Total revenue |
$ |
91,984 |
|
|
$ |
93,001 |
|
|
|
$ |
290,761 |
|
|
$ |
297,446 |
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
64,598 |
|
70.2 |
% |
|
61,420 |
|
66.0 |
% |
|
|
199,514 |
|
68.6 |
% |
|
194,390 |
|
65.4 |
% |
Gross profit |
|
27,386 |
|
29.8 |
% |
|
31,581 |
|
34.0 |
% |
|
|
91,247 |
|
31.4 |
% |
|
103,056 |
|
34.6 |
% |
|
|
|
|
|
|
|
|
|
|
Selling, general and
administrative expenses |
|
38,087 |
|
41.4 |
% |
|
35,149 |
|
37.8 |
% |
|
|
112,749 |
|
38.8 |
% |
|
110,028 |
|
37.0 |
% |
Acquisition related
compensation expense, net of contingency benefit |
|
750 |
|
0.8 |
% |
|
1,118 |
|
1.2 |
% |
|
|
2,991 |
|
1.0 |
% |
|
1,708 |
|
0.6 |
% |
Depreciation and
amortization expenses |
|
2,303 |
|
2.5 |
% |
|
3,425 |
|
3.7 |
% |
|
|
6,810 |
|
2.3 |
% |
|
9,989 |
|
3.4 |
% |
Loss from
operations |
|
(13,754 |
) |
-14.9 |
% |
|
(8,111 |
) |
-8.7 |
% |
|
|
(31,303 |
) |
-10.8 |
% |
|
(18,669 |
) |
-6.3 |
% |
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
277 |
|
0.3 |
% |
|
83 |
|
0.1 |
% |
|
|
444 |
|
0.2 |
% |
|
200 |
|
0.1 |
% |
Gain on insurance
proceeds |
|
- |
|
|
|
(27 |
) |
0.0 |
% |
|
|
- |
|
|
|
(8,733 |
) |
-2.9 |
% |
Other income |
|
(43 |
) |
0.0 |
% |
|
(32 |
) |
0.0 |
% |
|
|
(171 |
) |
-0.1 |
% |
|
(91 |
) |
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes |
|
(13,988 |
) |
-15.2 |
% |
|
(8,135 |
) |
-8.7 |
% |
|
|
(31,576 |
) |
-10.9 |
% |
|
(10,045 |
) |
-3.4 |
% |
Income tax expense
(benefit) |
|
64 |
|
0.1 |
% |
|
(64 |
) |
-0.1 |
% |
|
|
136 |
|
0.0 |
% |
|
40 |
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
Net
loss |
$ |
(14,052 |
) |
-15.3 |
% |
$ |
(8,071 |
) |
-8.7 |
% |
|
$ |
(31,712 |
) |
-10.9 |
% |
$ |
(10,085 |
) |
-3.4 |
% |
|
|
|
|
|
|
|
|
|
|
Basic and
diluted loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss
per share |
$ |
(0.39 |
) |
|
$ |
(0.22 |
) |
|
|
$ |
(0.87 |
) |
|
$ |
(0.28 |
) |
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of common shares outstanding - basic and diluted |
|
36,296 |
|
|
|
36,190 |
|
|
|
|
36,272 |
|
|
|
36,181 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED
BALANCE SHEET CAPTIONS: |
|
|
|
|
|
November 3, |
|
October 28, |
|
(in thousands, except
store data) |
|
|
|
|
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents,
and restricted cash |
|
|
|
|
|
$ |
14,563 |
|
|
$ |
16,158 |
|
|
Merchandise
inventory |
|
|
|
|
|
|
131,285 |
|
|
|
144,754 |
|
|
Fixed assets (net) |
|
|
|
|
|
|
12,177 |
|
|
|
43,472 |
|
|
Accounts payable |
|
|
|
|
|
|
42,272 |
|
|
|
45,378 |
|
|
Borrowings under line
of credit |
|
|
|
|
|
|
27,440 |
|
|
|
5,000 |
|
|
Stores in operation,
end of period |
|
|
|
|
|
|
227 |
|
|
|
268 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
- Reconciliation of net loss to adjusted EBITDA:
Adjusted EBITDA is defined as net loss, adjusted to
exclude: (i) income tax expense (benefit); (ii) gain on insurance
proceeds; (iii) other income (iv) interest expense; (v)
depreciation expense; (vi) acquisition related amortization
expense; (vii) and acquisition related compensation expense, which
includes retention bonuses, restricted stock, and contingency
benefit adjustment. Our method of calculating adjusted EBITDA
may differ from other issuers and accordingly, this measure may not
be comparable to measures used by other issuers. We use
adjusted EBITDA to evaluate our own operating performance and as an
integral part of our planning process. We present adjusted
EBITDA as a supplemental measure because we believe such measure is
useful to investors as a reasonable indicator of operating
performance. We believe this measure is a financial metric
used by many investors to compare companies. This measure is
not a recognized measure of financial performance under GAAP in the
United States, and should not be considered as a substitute for
operating earnings (losses), net earnings (loss) from continuing
operations or cash flows from operating activities, as determined
in accordance with GAAP.
` |
Thirteen Weeks Ended |
|
Thirty-nine Weeks Ended |
|
November 3, |
October 28, |
|
November 3, |
October 28, |
($ in thousands) |
2018 |
2017 |
|
2018 |
2017 |
|
|
|
|
|
|
Net
loss |
$ |
(14,052 |
) |
$ |
(8,071 |
) |
|
$ |
(31,712 |
) |
$ |
(10,085 |
) |
Income tax expense
(benefit) |
|
64 |
|
|
(64 |
) |
|
|
136 |
|
|
40 |
|
Gain on insurance
proceeds |
|
- |
|
|
(27 |
) |
|
|
- |
|
|
(8,733 |
) |
Other income |
|
(43 |
) |
|
(32 |
) |
|
|
(171 |
) |
|
(91 |
) |
Interest expense |
|
277 |
|
|
83 |
|
|
|
444 |
|
|
200 |
|
Operating
loss |
|
(13,754 |
) |
|
(8,111 |
) |
|
|
(31,303 |
) |
|
(18,669 |
) |
Depreciation
expense |
|
1,331 |
|
|
2,456 |
|
|
|
3,895 |
|
|
7,084 |
|
Acquisition related
amortization expense |
|
972 |
|
|
969 |
|
|
|
2,915 |
|
|
2,905 |
|
Acquisition related
compensation expense, net of contingency adjustment |
|
750 |
|
|
1,118 |
|
|
|
2,991 |
|
|
1,708 |
|
Adjusted
EBITDA |
$ |
(10,701 |
) |
$ |
(3,568 |
) |
|
$ |
(21,502 |
) |
$ |
(6,972 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The Company believes that etailz adjusted income
(loss) from operations, per the segment disclosure, when considered
together with its GAAP financial results, provides management and
investors with a more complete understanding of its business
operating results, including underlying trends, by excluding the
effects of certain charges. This measure is not a recognized
measure of financial performance under GAAP in the United States,
and should not be considered as a substitute for operating earnings
(losses), net earnings (loss) from continuing operations or cash
flows from operating activities, as determined in accordance with
GAAP.
Trans World Entertainment is a leading
multi-channel retail, blending a 40-year history of entertainment
retail experience with digital marketplace expertise. Our brands
seamlessly connect customers with the most comprehensive selection
of music, movies, and pop culture products on the channel of their
choice. For over 40 years, the Company has operated as a
leading specialty retailer of entertainment and pop culture
merchandise with stores in the United States and Puerto Rico,
primarily under the name fye, for your entertainment, and on
the web at www.fye.com and www.thirdspin.com. In
October 2016, the Company acquired etailz, Inc., a leading digital
marketplace expert retailer, operating both domestically and
internationally. etailz uses a data driven approach to digital
marketplace retailing utilizing proprietary software and ecommerce
insight coupled with a direct customer relationship engagement to
identify new distributors and wholesalers, isolate emerging product
trends, and optimize price positioning and inventory purchase
decisions. Trans World Entertainment, which established itself as a
public company in 1986, is traded on the Nasdaq National Market
under the symbol “TWMC”.
Certain statements in this release set forth management's
intentions, plans, beliefs, expectations or predictions of the
future based on current facts and analyses. Actual results
may differ materially from those indicated in such
statements. Additional information on factors that may affect
the business and financial results of the Company can be found in
filings of the Company with the Securities and Exchange
Commission.
Contact:Trans World
EntertainmentEdwin SapienzaChief
Financial Officer(518) 452-1242 |
|
Contact:Financial Relations
BoardMarilynn
Meek(mmeek@frbir.com)(212)
827-3773 |
|
|
|
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