Trans World Entertainment Announces Third Quarter Results
December 17 2019 - 04:25PM
Trans World Entertainment Corporation (Nasdaq: TWMC) today reported
financial results for its third quarter ended November 2, 2019.
Third Quarter Overview
- Consolidated
- Total revenue decreased 24.5% to $69.5 million compared to
$92.0 million in the third quarter of fiscal 2018.
- Loss from operations was $22.9 million compared to a loss from
operations of $13.8 million for the third quarter of fiscal
2018.
- Net loss was $23.2 million, or $12.73 per share, for the 13
weeks ended November 2, 2019, compared to a net loss of $14.1
million, or $7.74 per share, for the same period last year (see
note 1). Included in the third quarter 2019 operating results were
non-cash charges due to impairment of certain long lived assets in
the amount of $16.0 million.
- Adjusted EBITDA (a non-GAAP measure) was a loss of $5.7 million
compared to a loss of $10.7 million for the third quarter of fiscal
2018 (see note 2).
Thirty-nine weeks ended November
2, 2019 Overview
– Consolidated
- Total revenue for the thirty-nine weeks ended November 2, 2019
decreased 22.4% to $225.6 million, compared to $290.8 million for
the same period last year.
- Loss from operations was $37.9 million compared to a loss from
operations of $31.3 million for the thirty-nine weeks ended
November 3, 2018.
- Net loss was $39.1 million, or $21.51 per share, for the
thirty-nine weeks ended November 2, 2019, compared to a net loss of
$31.7 million, or $17.48 per share, for the same period last year
(see note 1). Included in the operating results were non-cash
charges due to impairment of certain long lived assets in the
amount of $16.0 million.
- Adjusted EBITDA (a non-GAAP measure) was a loss of $18.7
million compared to a loss of $21.5 million for the third quarter
of fiscal 2018 (see note 2).
- Cash used in operations during the thirty-nine weeks ended
November 2, 2019 was $30.8 million compared to $53.3 million for
the same period last year, an improvement of $22.5 million.
- Cash, cash equivalents and restricted cash as of November 2,
2019 was $9.2 million, compared to $14.6 million as of November 3,
2018.
- Inventory was $101.1 million at the end of third quarter of
2019 as compared to $131.3 million at the end of the third
quarter of 2018.
- Borrowings under the credit facility at the end of the third
quarter were $27.8 million as compared to $27.4 million at the end
of the third quarter last year. As of November 2, 2019, $11.0
million was available for borrowing.
Segment Highlights
|
|
Thirteen Weeks Ended |
|
Thirty-nine
Weeks Ended |
|
|
|
|
(amounts in thousands) |
November 2, 2019 |
November 3, 2018 |
|
November 2, 2019 |
November 3, 2018 |
|
|
|
|
Total Revenue |
|
|
|
|
|
|
|
|
|
fye |
$ |
40,840 |
$ |
47,865 |
|
$ |
127,602 |
$ |
152,473 |
|
|
|
|
etailz |
28,616 |
44,119 |
|
98,008 |
138,288 |
|
|
|
|
Total Company |
$ |
69,456 |
$ |
91,984 |
|
$ |
225,610 |
$ |
290,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Gross Profit |
|
|
|
|
|
|
|
|
|
fye |
$ |
16,155 |
$ |
18,276 |
|
$ |
50,670 |
$ |
61,181 |
|
|
|
|
etailz |
6,924 |
9,110 |
|
22,915 |
30,066 |
|
|
|
|
Total Company |
$ |
23,079 |
$ |
27,386 |
|
$ |
73,585 |
$ |
91,247 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SG&A |
|
|
|
|
|
|
|
|
|
fye |
$ |
21,012 |
$ |
26,620 |
|
$ |
67,094 |
$ |
79,214 |
|
|
|
etailz |
7,812 |
12,217 |
|
25,180 |
36,528 |
|
|
Total Company |
$ |
28,824 |
$ |
38,837 |
|
$ |
92,274 |
$ |
115,742 |
|
|
|
|
Loss From Operations |
|
|
|
|
|
|
|
|
|
fye |
$ |
(21,524) |
$ |
(9,493) |
|
$ |
(34,280) |
$ |
(21,495) |
|
|
|
|
etailz |
(1,353) |
(4,261) |
|
(3,640) |
(9,808) |
|
|
|
|
Total Company |
$ |
(22,877) |
$ |
(13,754) |
|
$ |
(37,920) |
$ |
(31,303) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of etailz Loss from Operations to etailz
Adjusted Loss From Operations |
|
|
|
|
|
|
|
etailz loss from operations |
$ |
(1,353) |
$ |
(4,261) |
|
$ |
(3,640) |
$ |
(9,808) |
|
|
|
|
Acquisition related amortization expense |
286 |
972 |
|
858 |
2,915 |
|
|
|
|
Acquisition related compensation expense, net of contingency
benefit |
- |
750 |
|
66 |
2,991 |
|
|
|
|
etailz adjusted loss from operations |
$ |
(1,067) |
$ |
(2,539) |
|
$ |
(2,716) |
$ |
(3,902) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of fye Loss From Operations to fye Adjusted
Loss From Operations |
|
|
|
|
|
|
|
fye Loss From Operations |
$ |
(21,524) |
$ |
(9,493) |
|
$ |
(34,280) |
$ |
(21,495) |
|
|
|
|
Asset impairment charges |
16,035 |
- |
|
16,035 |
- |
|
|
|
|
fye Adjusted Loss From Operations |
$ |
(5,489) |
$ |
(9,493) |
|
$ |
(18,245) |
$ |
(21,495) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Third Quarter Overview -
etailz
- Revenue for the third quarter was $28.6 million, compared to
$44.1 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 third quarter was $6.9 million, or 24.2%
of revenue, as compared to $9.1 million, or 20.6% of revenue, for
the same period last year.
- Selling, general and administrative (“SG&A”) expenses for
the third quarter were $7.8 million, or 27.3% of revenue, compared
to $12.2 million, or 27.7% 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 of fiscal
2018.
- etailz loss from operations was $1.4 million for the third
quarter versus $4.3 million for the same period last
year.
- etailz adjusted loss from operations (a non-GAAP measure) was
$1.1 million for the third quarter of fiscal 2019 as compared to
$2.5 million for the third quarter of fiscal 2018 (see note
2).
Thirty-nine weeks ended November
2, 2019 Overview –
etailz
- Revenue for the thirty-nine weeks ended November 2, 2019 was
$98.0 million compared to $138.3 million for the same period last
year.
- Gross profit for the thirty-nine weeks ended November 2, 2019
was $22.9 million, or 23.4% of revenue, compared to $30.1 million,
or 21.7% of revenue, for the same period last
year.
- SG&A expenses for the thirty-nine weeks ended November 2,
2019 were $25.2 million, or 25.7% of revenue, compared to $36.5
million, or 26.5% of revenue, for the same period last
year.
- etailz adjusted loss from operations (a non-GAAP measure) was
$2.7 million for the thirty-nine weeks ended November 2, 2019
compared to a loss of $3.9 million for the same period last year
(see note 2).
Third Quarter Overview -
fye
- For the quarter ended November 2, 2019, revenue decreased 14.7%
to $40.8 million, compared to $47.9 million for the same period
last year. Comparable store sales were down 5.2% compared to the
same quarter last year, as a comparable store sales increase of
6.3% in the lifestyle category was offset by declines in the media
categories. The lifestyle category represented 46.2% of
revenue for the quarter as compared to 41.9% for the same period
last year.
- Gross profit for the third quarter was $16.2 million, or 39.6%
of revenue, compared to $18.3 million, or 38.2% of revenue, for the
same period last year.
- SG&A expenses decreased $5.6 million, or 21.1%, for the
third quarter to $21.0 million, or 51.4% of revenue, compared to
$26.6 million, or 55.6% of revenue, for the same period last
year. The decline in SG&A expenses was due to fewer
stores in operation.
- The fye segment recorded an operating loss of $21.5 million for
the 13 weeks ended November 2, 2019, compared to an operating loss
of $9.5 million for same period last year. Included in the
operating results were non-cash charges due to impairment of
certain long lived assets in the amount of $16.0 million.
- As of November 2, 2019, fye segment inventory was $69 per
square foot as compared to $76 per square foot as of November 3,
2018.
Thirty-nine weeks ended November
2, 2019 Overview
– fye
- For the thirty-nine weeks ended November 2, 2019, revenue
decreased 16.3% to $127.6 million, compared to $152.5 million for
the same period last year.
- Gross profit for the thirty-nine weeks ended November 2, 2019
was $50.7 million, or 39.7% of revenue, compared to $61.2 million,
or 40.1% of revenue, for the same period last year.
- For the thirty-nine weeks ended November 2, 2019, SG&A
expenses decreased $12.1 million, or 15.3%, to $67.1 million
compared to $79.2 million in the comparable period last year.
As a percentage of revenue, SG&A expenses were 52.6% versus
52.0% for the same period last year. The decline in SG&A
expenses was due to fewer stores in operation.
- The fye segment recorded an operating loss of $34.3 million for
the thirty-nine weeks ended November 2, 2019, compared to an
operating loss of $21.5 million for same period last year.
Included in the operating results were non-cash charges due to
impairment of certain long lived assets in the amount of $16.0
million.
|
|
|
|
|
|
|
TRANS WORLD
ENTERTAINMENT CORPORATION |
Condensed
Consolidated Financial Results |
STATEMENTS OF OPERATIONS: |
|
|
|
|
|
|
|
|
|
|
(in
thousands, except per share data) |
|
|
|
|
|
|
|
|
|
|
|
Thirteen
Weeks Ended |
|
Thirty-nine
Weeks Ended |
|
November 2, |
% to |
November 3, |
% to |
|
November 2, |
% to |
November 3, |
% to |
|
|
2019 |
|
Revenue |
|
2018 |
Revenue |
|
|
2019 |
|
Revenue |
|
2018 |
|
Revenue |
|
|
|
|
|
|
|
|
|
|
|
Net
sales |
$ |
68,592 |
|
|
$ |
90,877 |
|
|
|
|
$ |
223,100 |
|
|
$ |
287,148 |
|
|
Other
revenue |
|
864 |
|
|
|
1,107 |
|
|
|
|
|
2,510 |
|
|
|
3,613 |
|
|
Total
revenue |
$ |
69,456 |
|
|
$ |
91,984 |
|
|
|
|
$ |
225,610 |
|
|
$ |
290,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
46,377 |
|
66.8 |
% |
|
64,598 |
|
|
70.2 |
% |
|
|
152,025 |
|
67.4 |
% |
|
199,514 |
|
68.6 |
% |
Gross
profit |
|
23,079 |
|
33.2 |
% |
|
27,386 |
|
|
29.8 |
% |
|
|
73,585 |
|
32.6 |
% |
|
91,247 |
|
31.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
Selling,
general and |
|
|
|
|
|
|
|
|
|
|
administrative expenses |
|
28,824 |
|
41.5 |
% |
|
38,087 |
|
|
41.4 |
% |
|
|
92,274 |
|
40.9 |
% |
|
112,751 |
|
38.8 |
% |
Asset
Impairment charges |
|
16,035 |
|
23.1 |
% |
|
- |
|
|
0.0 |
% |
|
|
16,035 |
|
7.1 |
% |
|
- |
|
0.0 |
% |
Acquisition
related compensation expenses |
|
- |
|
0.0 |
% |
|
750 |
|
|
0.8 |
% |
|
|
66 |
|
0.0 |
% |
|
2,991 |
|
1.0 |
% |
Depreciation
and amortization expenses |
|
1,097 |
|
1.6 |
% |
|
2,303 |
|
|
2.5 |
% |
|
|
3,130 |
|
1.4 |
% |
|
6,808 |
|
2.3 |
% |
Loss
from operations |
|
(22,877 |
) |
-32.9 |
% |
|
(13,754 |
) |
|
-15.0 |
% |
|
|
(37,920 |
) |
-16.8 |
% |
|
(31,303 |
) |
-10.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
Interest
expense |
|
228 |
|
0.3 |
% |
|
277 |
|
|
0.3 |
% |
|
|
554 |
|
0.2 |
% |
|
444 |
|
0.2 |
% |
Other
(income) loss |
|
(30 |
) |
0.0 |
% |
|
(43 |
) |
|
0.0 |
% |
|
|
388 |
|
0.2 |
% |
|
(171 |
) |
-0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
Loss before
income taxes |
|
(23,075 |
) |
-33.2 |
% |
|
(13,988 |
) |
|
-15.2 |
% |
|
|
(38,862 |
) |
-17.2 |
% |
|
(31,576 |
) |
-10.9 |
% |
Income tax
expense |
|
80 |
|
0.1 |
% |
|
64 |
|
|
0.1 |
% |
|
|
223 |
|
0.1 |
% |
|
136 |
|
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
$ |
(23,155 |
) |
-33.3 |
% |
$ |
(14,052 |
) |
|
-15.3 |
% |
|
$ |
(39,085 |
) |
-17.3 |
% |
$ |
(31,712 |
) |
-10.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted loss per share |
$ |
(12.73 |
) |
|
$ |
(7.74 |
) |
|
|
|
$ |
(21.51 |
) |
|
$ |
(17.48 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted
average number of |
|
|
|
|
|
|
|
|
|
|
common shares outstanding - basic and diluted |
|
1,819 |
|
|
|
1,815 |
|
|
|
|
|
1,817 |
|
|
|
1,814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED BALANCE SHEET CAPTIONS: |
|
|
|
|
November 2, |
|
November 3, |
|
(in
thousands, except store data) |
|
|
|
|
|
|
2019 |
|
|
|
2018 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash
equivalents, and restricted cash |
|
|
|
|
|
|
$ |
9,162 |
|
|
$ |
14,563 |
|
|
Merchandise
inventory |
|
|
|
|
|
|
|
101,130 |
|
|
|
131,285 |
|
|
Fixed assets
(net) |
|
|
|
|
|
|
|
4,987 |
|
|
|
12,177 |
|
|
Accounts
payable |
|
|
|
|
|
|
|
29,994 |
|
|
|
42,272 |
|
|
Borrowings
under line of credit |
|
|
|
|
|
|
|
27,771 |
|
|
|
27,440 |
|
|
Cash used in
operations |
|
|
|
|
|
|
|
30,822 |
|
|
|
53,337 |
|
|
Stores in
operation, end of period |
|
|
|
|
|
|
|
206 |
|
|
|
227 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Notes:
1. Reverse Stock Split:
As previously reported, effective August 15th,
2019, the Company effected a 1-20 reverse stock split of its common
stock. All share and earnings per share information have been
retroactively adjusted to reflect this reverse stock
split.
2. Reconciliation of net loss to
adjusted EBITDA:
Adjusted EBITDA is defined as net loss, adjusted to
exclude: (i) income tax expense; (ii) other (loss) income, which
includes the write-down of an investment; (iii) interest expense;
(iv) depreciation expense; (v) acquisition related amortization
expense; (vi) acquisition related compensation expense, which
includes retention bonuses and restricted stock; and (vii) asset
impairment charges. 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
2, |
November
3, |
|
November
2, |
November
3, |
|
(amounts in thousands) |
|
2019 |
|
|
2018 |
|
|
|
2019 |
|
|
2018 |
|
|
|
|
|
|
|
|
|
Net
loss |
$ |
(23,155 |
) |
$ |
(14,052 |
) |
|
$ |
(39,085 |
) |
$ |
(31,712 |
) |
|
Income tax
expense |
|
80 |
|
|
64 |
|
|
|
223 |
|
|
136 |
|
|
Other
(income) loss |
|
(30 |
) |
|
(43 |
) |
|
|
388 |
|
|
(171 |
) |
|
Interest
expense |
|
228 |
|
|
277 |
|
|
|
554 |
|
|
444 |
|
|
Operating loss |
|
(22,877 |
) |
|
(13,754 |
) |
|
|
(37,920 |
) |
|
(31,303 |
) |
|
Depreciation
expense |
|
811 |
|
|
1,331 |
|
|
|
2,272 |
|
|
3,893 |
|
|
Asset
impairment charges |
|
16,035 |
|
|
- |
|
|
|
16,035 |
|
|
- |
|
|
Acquisition
related amortization expense |
|
286 |
|
|
972 |
|
|
|
858 |
|
|
2,915 |
|
|
Acquisition
related compensation expense, net of contingency adjustment |
|
- |
|
|
750 |
|
|
|
66 |
|
|
2,991 |
|
|
Adjusted EBITDA |
$ |
(5,745 |
) |
$ |
(10,701 |
) |
|
$ |
(18,689 |
) |
$ |
(21,504 |
) |
|
|
|
|
|
|
|
|
The Company believes that fye adjusted loss from
operations and 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
EntertainmentEd Sapienza Chief
Financial Officer (518) 452-1242 |
Contact:Financial Relations
BoardMarilynn Meek
(mmeek@frbir.com)(212)
827-3773 |
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