Trans World Entertainment Announces First Quarter Results
May 28 2019 - 5:57PM
Trans World Entertainment Corporation (Nasdaq: TWMC) today reported
financial results for its first quarter ended May 4, 2019.
“The fye segment delivered flat comparable store
sales driven by a 7.3% increase in our lifestyle categories.
Our customers continue to respond positively to our exclusive,
unique and engaging merchandise,” commented Mike Feurer, Company
CEO. “In the etailz segment, we saw the benefits of the performance
improvement initiatives implemented in the Fourth Quarter of 2018,
highlighted by improved gross margins, lower SG&A expenses and
improved supply chain efficiency. As a result of these
initiatives and disciplined inventory management in the fye
segment, we were able to reduce cash used in operations by over $10
million for the first quarter as compared to the first quarter of
last year,” concluded Mr. Feurer.
First Quarter Overview
- Consolidated
- Total revenue decreased 17.0% to
$80.2 million compared to $96.6 million in the first quarter of
fiscal 2018.
- Net loss was $7.8 million, or $0.21
per diluted share, for the 13 weeks ended May 4, 2019, compared to
a net loss of $8.1 million, or $0.22 per diluted share, for the
same period last year.
- Loss from operations was $7.6
million compared to a loss from operations of $8.2 million for the
first quarter of fiscal 2018.
- Adjusted EBITDA (a non-GAAP
measure) was a loss of $6.6 million compared to a loss of $4.8
million for the first quarter of fiscal 2018 (see note 1).
- Cash and cash equivalents as of May
4, 2019 was $3.8 million, compared to $14.5 million as of May 5,
2018.
- Inventory was $88.5 million as of
May 4, 2019 as compared to $110.7 million as of May 5,
2018.
- Cash used in operations during the
first quarter of fiscal 2019 was $6.2 million compared to $16.6
million for the same period last year.
Segment Highlights
|
|
|
(amounts in
thousands) |
Thirteen Weeks Ended |
|
May 4, 2019 |
May 5, 2018 |
Total Revenue |
|
|
fye |
$ |
45,018 |
|
$ |
54,063 |
|
etailz |
|
35,132 |
|
|
42,540 |
|
Total Company |
$ |
80,150 |
|
$ |
96,603 |
|
|
|
|
Gross Profit |
|
|
fye |
$ |
17,502 |
|
$ |
22,271 |
|
etailz |
|
7,888 |
|
|
9,417 |
|
Total Company |
$ |
25,390 |
|
$ |
31,688 |
|
|
|
|
SG&A Expenses |
|
|
fye |
$ |
23,030 |
|
$ |
26,489 |
|
etailz |
|
8,955 |
|
|
10,003 |
|
Total Company |
$ |
31,985 |
|
$ |
36,492 |
|
Loss From Operations |
|
|
fye |
$ |
(6,100 |
) |
$ |
(5,372 |
) |
etailz |
|
(1,541 |
) |
|
(2,786 |
) |
Total Company |
$ |
(7,641 |
) |
$ |
(8,158 |
) |
|
|
|
Reconciliation of etailz Loss From Operations to etailz
Adjusted Loss From Operations |
etailz loss from operations |
$ |
(1,541 |
) |
$ |
(2,786 |
) |
Acquisition related amortization expense |
|
286 |
|
|
972 |
|
Acquisition related compensation expenses |
|
66 |
|
|
1,121 |
|
etailz Adjusted Loss From Operations |
$ |
(1,189 |
) |
$ |
(693 |
) |
|
|
|
First Quarter Overview - etailz
- Revenue for the first quarter was $35.1 million, compared to
$42.5 million for the same period last year. The decline in
revenue was due to the vendor rationalization and remediation
initiative. Rationalization and remediation activities
included terminating unprofitable vendors and improving vendor
relationships through negotiations focused on improvements to gross
margins and supply chain efficiencies.
- Gross profit for the first quarter was $7.9 million, or 22.5%
of revenue, as compared to $9.4 million, or 22.1% of revenue, for
the same period last year.
- Selling, general, and administrative “SG&A” expenses for
the first quarter were $9.0 million, or 25.5% of revenue, compared
to $10.0 million, or 23.5% of revenue, for the same period last
year. The decline in SG&A expenses was due to expense
reduction initiatives implemented in the fourth quarter.
- etailz loss from operations was $1.5 million for the first
quarter versus a loss of $2.8 million for the same period
last year.
- etailz adjusted loss from operations (a non-GAAP measure) was
$1.2 million for the first quarter of fiscal 2019 compared to a
loss of $0.7 million for the first quarter of fiscal 2018 (see note
1).
First Quarter Overview - fye
- Total revenue declined 16.7% for
the fye segment. Comparable store sales were flat compared to
the same quarter last year, as a comparable store sales increase of
7.3% in the lifestyle category offset declines in the media
categories. The lifestyle and electronics categories
represented 53.9% of revenue for the first quarter as compared to
49.5% for the same period last year.
- Gross profit for the first quarter
was $17.5 million, or 38.9% of revenue, compared to $22.3 million,
or 41.2% of revenue, for the same period last year. Gross margin
improved throughout the quarter as we refreshed our trend
merchandise following the holiday season.
- SG&A expenses decreased $3.5
million, or 13.1%, for the first quarter to $23.0 million, or 51.2%
of revenue, compared to $26.5 million, or 49.0% of revenue, for the
same period last year. The decline in SG&A expenses was
due to fewer stores in operation and other expense saving
initiatives implemented in the Fourth Quarter of 2018. The
increase in SG&A as a percentage of revenue was due to an
increase in healthcare costs and outside consulting fees.
- The fye segment recorded an
operating loss of $6.1 million for the first quarter, compared to
an operating loss of $5.4 million for same period last year.
- fye segment inventory was $60 per
square foot, the same level as the prior year.
Trans World will host a teleconference call
Thursday, May 30, 2019, 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 CORPORATION |
Condensed Consolidated Financial Results |
|
|
|
|
|
|
CONSOLIDATED
STATEMENTS OF OPERATIONS: |
|
|
|
|
|
(in thousands, except per
share data) |
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
|
May 4, |
% to |
May 5, |
% to |
|
|
|
2019 |
|
Revenue |
|
2018 |
|
Revenue |
|
|
|
|
|
|
Net sales |
|
$ |
79,289 |
|
|
$ |
95,232 |
|
|
Other revenue |
|
|
861 |
|
|
|
1,371 |
|
|
Total revenue |
|
$ |
80,150 |
|
|
$ |
96,603 |
|
|
|
|
|
|
|
|
Cost of sales |
|
|
54,760 |
|
68.3 |
% |
|
64,915 |
|
67.2 |
% |
Gross profit |
|
|
25,390 |
|
31.7 |
% |
|
31,688 |
|
32.8 |
% |
|
|
|
|
|
|
Selling, general and |
|
|
|
|
|
administrative
expenses |
|
|
31,985 |
|
39.9 |
% |
|
36,492 |
|
37.8 |
% |
Acquisition related
compensation expense |
|
|
66 |
|
0.1 |
% |
|
1,121 |
|
1.2 |
% |
Depreciation and amortization
expenses |
|
|
980 |
|
1.3 |
% |
|
2,233 |
|
2.4 |
% |
Loss from operations |
|
|
(7,641 |
) |
-9.5 |
% |
|
(8,158 |
) |
-8.4 |
% |
|
|
|
|
|
|
Interest expense |
|
|
132 |
|
0.2 |
% |
|
64 |
|
0.1 |
% |
Other income |
|
|
(43 |
) |
-0.1 |
% |
|
(79 |
) |
-0.1 |
% |
|
|
|
|
|
|
Loss before income taxes |
|
|
(7,730 |
) |
-9.6 |
% |
|
(8,143 |
) |
-8.4 |
% |
Income tax expense |
|
|
72 |
|
0.1 |
% |
|
4 |
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
Net loss |
|
$ |
(7,802 |
) |
-9.7 |
% |
$ |
(8,147 |
) |
-8.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common share |
|
$ |
(0.21 |
) |
|
$ |
(0.22 |
) |
|
|
|
|
|
|
|
Weighted average number
of |
|
|
|
|
|
common shares
outstanding - basic and diluted |
|
|
36,322 |
|
|
|
36,237 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED
BALANCE SHEET/CASH FLOWS CAPTIONS: |
May 4, |
|
May 5, |
|
(in thousands, except store
data) |
|
|
2019 |
|
|
|
2018 |
|
|
|
|
|
|
|
|
Cash and cash equivalents |
|
$ |
3,822 |
|
|
$ |
14,509 |
|
|
Merchandise inventory |
|
|
88,487 |
|
|
|
110,677 |
|
|
Fixed assets (net) |
|
|
7,673 |
|
|
|
13,138 |
|
|
Accounts payable |
|
|
28,925 |
|
|
|
36,894 |
|
|
Borrowings under line of
credit |
|
|
3,072 |
|
|
|
- |
|
|
Cash used in operations |
|
|
6,182 |
|
|
|
16,621 |
|
|
Stores in operation, end of
period |
|
|
206 |
|
|
|
253 |
|
|
|
|
|
|
|
|
Notes:
- Reconciliation of net loss to adjusted EBITDA:
Adjusted EBITDA is defined as net loss, adjusted to
exclude: (i) income tax expense; (ii) other income; (iii) interest
expense; (iv) depreciation expense; (v) acquisition related
amortization expense; and (vi) acquisition related compensation
expense, which includes retention bonuses and restricted
stock. 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.
|
|
|
|
(amounts in
thousands) |
|
|
|
|
Thirteen Weeks Ended |
|
|
May 4, |
May 5, |
|
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
Net loss |
$ |
(7,802 |
) |
$ |
(8,147 |
) |
|
Income tax expense |
|
72 |
|
|
4 |
|
|
Other income |
|
(43 |
) |
|
(79 |
) |
|
Interest expense |
|
132 |
|
|
64 |
|
|
Loss from
Operations |
|
(7,641 |
) |
|
(8,158 |
) |
|
Depreciation expense |
|
694 |
|
|
1,261 |
|
|
Acquisition related
amortization expense |
|
286 |
|
|
972 |
|
|
Acquisition related
compensation expense |
|
66 |
|
|
1,121 |
|
|
Adjusted
EBITDA |
$ |
(6,595 |
) |
$ |
(4,804 |
) |
|
|
|
|
|
The Company believes that etailz adjusted 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 retailer, 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.secondspin.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 Sapienza
Chief Financial Officer(518)
452-1242 |
Contact:Financial
Relations BoardMarilynn Meek
(mmeek@frbir.com)(212)
827-3773 |
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