Trans World Entertainment Announces Second Quarter Results
August 30 2018 - 6:30AM
Trans World Entertainment Corporation (Nasdaq: TWMC) today reported
financial results for its second quarter ended August 4, 2018.
“etailz revenue increased 19% from the
comparative quarter in Fiscal 2017 and contributed 51% of total
consolidated revenue as compared to 43% in the prior year. The 19%
increase followed a 48% increase in the second quarter of 2017. We
continue to invest in the growth opportunity of the existing model,
as well as a number of additional higher margin marketplace
platform opportunities. In the fye segment, our sales results
were impacted by tough comparisons due to the performance of fidget
spinners, which represented 4% of sales in the second quarter of
last year. Efforts to change our merchandise point of view
based on unique, relevant, collaborative and exclusive merchandise
is starting to yield results as sales improved throughout the
quarter with July comp sales down 0.7%,” commented Mike Feurer,
Chief Executive Officer.
Second Quarter Overview
Consolidated
- Total revenue decreased 0.3% to $102.2 million compared to
$102.5 million in the second quarter of fiscal 2017.
- Net loss was $9.5 million, or $0.26 per share, for the 13 weeks
ended August 4, 2018, compared to a net loss of $5.6 million, or
$0.15 per share, for the same period last year.
- Loss from operations was $9.4 million compared to an operating
loss of $5.4 million for the second quarter of fiscal 2017.
- Adjusted EBITDA (a non-GAAP measure) was a loss of $6.0 million
compared to a loss of $2.3 million for the second quarter of fiscal
2017 (see note 1).
- Cash, cash equivalents and restricted cash as of August 4, 2018
was $14.7 million, compared to $26.2 million as of July 29,
2017.
- Borrowings under the credit facility at the end of the second
quarter were $6.3 million. There were no borrowings under the
credit facility at the end of the second quarter last
year.
- Inventory was $114.9 million at the end of second quarter of
2018 as compared to $126.7 million at the end of the second
quarter of 2017.
Twenty-six weeks ended August 4,
2018 Overview –
Consolidated
- Total revenue for the twenty-six weeks ended August 4, 2018
decreased 2.8% to $198.8 million, compared to $204.4 million for
the same period last year.
- Net loss was $17.7 million, or $0.49 per share, for the
twenty-six weeks ended August 4, 2018, compared to a net loss of
$2.0 million, or $0.06 per share, for the same period last year.
During the first half of last year, 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 $17.5 million compared to an operating
loss of $10.6 million for the twenty-six weeks ended July 29,
2017.
- Adjusted EBITDA (a non-GAAP measure) was a loss of $10.8
million compared to a loss of $3.4 million for the second quarter
of fiscal 2017 (see note 1).
|
Segment Highlights |
|
|
Thirteen Weeks Ended |
|
Twenty-six Weeks Ended |
($ in thousands) |
August 4, 2018 |
July 29, 2017 |
|
August 4, 2018 |
July 29, 2017 |
Total
Revenue |
|
|
|
|
|
fye |
$ |
50,545 |
|
$ |
58,958 |
|
|
$ |
104,608 |
|
$ |
123,902 |
|
etailz |
|
51,629 |
|
|
43,521 |
|
|
|
94,169 |
|
|
80,544 |
|
Total
Company |
$ |
102,174 |
|
$ |
102,479 |
|
|
$ |
198,777 |
|
$ |
204,446 |
|
|
|
|
|
|
|
Gross
Profit |
|
|
|
|
|
fye |
$ |
20,634 |
|
$ |
25,085 |
|
|
$ |
42,905 |
|
$ |
51,995 |
|
etailz |
|
11,539 |
|
|
10,085 |
|
|
|
20,956 |
|
|
19,480 |
|
Total
Company |
$ |
32,173 |
|
$ |
35,170 |
|
|
$ |
63,861 |
|
$ |
71,475 |
|
|
|
|
|
|
|
SG&A |
|
|
|
|
|
fye |
$ |
26,103 |
|
$ |
28,226 |
|
|
$ |
52,592 |
|
$ |
57,321 |
|
etailz |
|
12,067 |
|
|
9,291 |
|
|
|
22,070 |
|
|
17,576 |
|
Total
Company |
$ |
38,170 |
|
$ |
37,517 |
|
|
$ |
74,662 |
|
$ |
74,897 |
|
Loss From
Operations |
|
|
|
|
|
fye |
$ |
(6,629 |
) |
$ |
(5,467 |
) |
|
$ |
(12,001 |
) |
$ |
(9,853 |
) |
etailz |
|
(2,760 |
) |
|
98 |
|
|
|
(5,547 |
) |
|
(723 |
) |
Total
Company |
$ |
(9,389 |
) |
$ |
(5,369 |
) |
|
$ |
(17,548 |
) |
$ |
(10,576 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation of etailz Income (Loss) from Operations to
etailz Adjusted Income (Loss) From Operations |
etailz
income (loss) from operations |
$ |
(2,760 |
) |
$ |
98 |
|
|
$ |
(5,547 |
) |
$ |
(723 |
) |
Acquisition related amortization expense |
$ |
972 |
|
$ |
965 |
|
|
$ |
1,944 |
|
$ |
1,936 |
|
Acquisition related compensation expense, net of contingency
benefit |
$ |
1,118 |
|
$ |
(319 |
) |
|
$ |
2,240 |
|
$ |
590 |
|
etailz adjusted income (loss) from operations |
$ |
(670 |
) |
$ |
744 |
|
|
$ |
(1,363 |
) |
$ |
1,803 |
|
|
|
|
|
|
|
Second Quarter Overview - etailz
- Revenue for the second quarter was $51.6 million, an 18.6%
increase as compared to the second quarter of 2017. etailz
revenue contributed 50.5% of total consolidated revenue during the
quarter as compared to 42.5% for the same period last year.
- Gross profit for the second quarter was $11.5 million, or 22.3%
of revenue, as compared to $10.1 million, or 23.2% 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 for
the second quarter were $12.1 million, or 23.4% of revenue,
compared to $9.3 million, or 21.3% of revenue, for the same period
last year. The increase in SG&A expenses was due to
higher marketplace commissions on the higher sales and investments
in product identification and sourcing, technology, and
diversification.
- etailz loss from operations was $2.8 million for the second
quarter versus income of $0.1 million for the same period
last year.
- etailz adjusted loss from operations (a non-GAAP measure) was
$0.7 million for the second quarter of fiscal 2018 compared to
income of $0.7 million for the second quarter of fiscal 2017 (see
note 1).
Twenty-six weeks ended August 4, 2018
Overview – etailz
- Revenue for the twenty-six weeks ended August 4, 2018 was $94.2
million, a 16.9% increase as compared to the same period in fiscal
2017. etailz revenue contributed 47.4% of total consolidated
revenue during the first half of fiscal 2018 as compared to 39.4%
in the same period last year.
- Total gross profit for the twenty-six weeks ended August 4,
2018 was $21.0 million, or 22.3% of revenue, compared to $19.5
million, or 24.2% of revenue, for the same period last
year.
- SG&A expenses for the twenty-six weeks ended August 4, 2018
were $22.1 million, or 23.4% of revenue, compared to $17.6 million,
or 21.8% of revenue, for the same period last
year.
- etailz adjusted loss from operations (a non-GAAP measure) was
$1.4 million for the first half of fiscal 2018 compared to income
of $1.8 million for the same period last year (see note 1).
Second Quarter Overview -
fye
- Revenue declined 14.3% for the fye segment. The decline
in revenue resulted from a 10.4% decline in total stores in
operation and a 6.7% decline in comparable store sales compared to
the same quarter last year.
- Gross profit for the second quarter was $20.6 million, or 40.8%
of revenue, compared to $25.1 million, or 42.5% of revenue, for the
same period last year.
- SG&A expenses decreased $2.1 million, or 7.5%, for the
second quarter to $26.1 million, or 51.6% of fye revenue, compared
to $28.2 million, or 47.9% 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 the comparable store sales
decline.
- The fye segment recorded an operating loss of $6.6 million for
the 13 weeks ended August 4, 2018, compared to an operating loss of
$5.5 million for same period last year.
- As of August 4, 2018, fye segment inventory was $62 per square
foot as compared to $67 per square foot as of July 29, 2017.
Twenty-six weeks ended August 4,
2018 Overview – fye
- For the twenty-six weeks ended August 4, 2018, revenue
decreased 15.6% to $104.6 million, compared to $123.9 million for
the same period last year.
- Gross profit for the twenty-six weeks ended August 4, 2018 was
$42.9 million, or 41.0% of revenue, compared to $52.0 million, or
42.0% of revenue, for the same period last year.
- For the twenty-six weeks ended August 4, 2018, SG&A
expenses decreased $4.7 million, or 8.3% to $52.6 million compared
to $57.3 million in the comparable period last year. As a
percentage of revenue, SG&A expenses were 50.3% versus 46.3%
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.
- The fye segment recorded an operating loss of $12.0 million for
the twenty-six weeks ended August 4, 2018, compared to an operating
loss of $9.9 million for same period last year.
Trans World will host a teleconference call
Thursday, August 30, 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
CORPORATION |
Condensed Consolidated Financial
Results |
STATEMENTS OF
OPERATIONS: |
|
|
|
|
|
|
|
|
|
|
(in thousands, except
per share data) |
|
|
|
|
|
|
|
|
|
|
|
Thirteen Weeks Ended |
|
Twenty-six Weeks Ended |
|
August 4, |
% to |
July 29, |
% to |
|
August 4, |
% to |
July 29, |
% to |
|
2018 |
Revenue |
2017 |
Revenue |
|
2018 |
Revenue |
2017 |
Revenue |
|
|
|
|
|
|
|
|
|
|
|
Net sales |
$ |
101,039 |
|
|
$ |
100,914 |
|
|
|
|
$ |
196,271 |
|
|
$ |
201,665 |
|
|
Other revenue |
|
1,135 |
|
|
|
1,565 |
|
|
|
|
|
2,506 |
|
|
|
2,781 |
|
|
Total revenue |
$ |
102,174 |
|
|
$ |
102,479 |
|
|
|
|
$ |
198,777 |
|
|
$ |
204,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost of sales |
|
70,001 |
|
68.5 |
% |
|
67,309 |
|
|
65.7 |
% |
|
|
134,916 |
|
67.9 |
% |
|
132,971 |
|
65.0 |
% |
Gross profit |
|
32,173 |
|
31.5 |
% |
|
35,170 |
|
|
34.3 |
% |
|
|
63,861 |
|
32.1 |
% |
|
71,475 |
|
35.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
Selling, general
and |
|
|
|
|
|
|
|
|
|
|
administrative expenses |
|
38,170 |
|
37.4 |
% |
|
37,517 |
|
|
36.6 |
% |
|
|
74,662 |
|
37.6 |
% |
|
74,897 |
|
36.6 |
% |
Acquisition related
compensation expense, net of contingency benefit |
|
1,118 |
|
1.1 |
% |
|
(319 |
) |
|
-0.3 |
% |
|
|
2,240 |
|
1.1 |
% |
|
590 |
|
0.3 |
% |
Depreciation and
amortization expenses |
|
2,274 |
|
2.2 |
% |
|
3,341 |
|
|
3.3 |
% |
|
|
4,507 |
|
2.3 |
% |
|
6,564 |
|
3.2 |
% |
Loss from
operations |
|
(9,389 |
) |
-9.1 |
% |
|
(5,369 |
) |
|
-5.2 |
% |
|
|
(17,548 |
) |
-8.8 |
% |
|
(10,576 |
) |
-5.2 |
% |
|
|
|
|
|
|
|
|
|
|
|
Interest expense |
|
103 |
|
0.1 |
% |
|
59 |
|
|
0.1 |
% |
|
|
166 |
|
0.1 |
% |
|
115 |
|
0.1 |
% |
Loss (gain) on
insurance proceeds |
|
- |
|
|
|
129 |
|
|
0.1 |
% |
|
|
- |
|
|
|
(8,706 |
) |
-4.3 |
% |
Other income |
|
(49 |
) |
0.0 |
% |
|
(43 |
) |
|
0.0 |
% |
|
|
(128 |
) |
-0.1 |
% |
|
(57 |
) |
0.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
Loss before income
taxes |
|
(9,443 |
) |
-9.2 |
% |
|
(5,514 |
) |
|
-5.4 |
% |
|
|
(17,586 |
) |
-8.8 |
% |
|
(1,928 |
) |
-0.9 |
% |
Income tax expense |
|
67 |
|
0.1 |
% |
|
51 |
|
|
0.0 |
% |
|
|
71 |
|
0.0 |
% |
|
105 |
|
0.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
Net
loss |
$ |
(9,510 |
) |
-9.3 |
% |
$ |
(5,565 |
) |
|
-5.4 |
% |
|
$ |
(17,657 |
) |
-8.9 |
% |
$ |
(2,033 |
) |
-1.0 |
% |
|
|
|
|
|
|
|
|
|
|
|
Basic and
diluted loss per common share: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic and diluted loss
per share |
$ |
(0.26 |
) |
|
$ |
(0.15 |
) |
|
|
|
$ |
(0.49 |
) |
|
$ |
(0.06 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number
of |
|
|
|
|
|
|
|
|
|
|
common
shares outstanding - basic and diluted |
|
36,352 |
|
|
|
36,179 |
|
|
|
|
|
36,295 |
|
|
|
36,179 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SELECTED
BALANCE SHEET CAPTIONS: |
|
|
|
|
|
|
August 4, |
|
July 29, |
|
(in thousands, except
store data) |
|
|
|
|
|
|
2018 |
|
2017 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash, cash equivalents,
and restricted cash |
|
|
|
|
|
|
$ |
14,740 |
|
|
$ |
26,169 |
|
|
Merchandise
inventory |
|
|
|
|
|
|
|
114,920 |
|
|
|
126,687 |
|
|
Fixed assets (net) |
|
|
|
|
|
|
|
12,648 |
|
|
|
43,876 |
|
|
Accounts payable |
|
|
|
|
|
|
|
34,200 |
|
|
|
37,169 |
|
|
Borrowings under line
of credit |
|
|
|
|
|
|
|
6,341 |
|
|
|
- |
|
|
Stores in operation,
end of period |
|
|
|
|
|
|
|
241 |
|
|
|
269 |
|
|
Notes:
- Reconciliation of net loss to adjusted EBITDA:Adjusted EBITDA
is defined as net income (loss), adjusted to exclude: (i) income
tax expense; (ii) gain (loss) 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 |
|
Twenty-six Weeks Ended |
|
August 4, |
July 29, |
|
August 4, |
July 29, |
($ in thousands) |
2018 |
2017 |
|
2018 |
2017 |
|
|
|
|
|
|
Net
loss |
$ |
(9,510 |
) |
$ |
(5,565 |
) |
|
$ |
(17,657 |
) |
$ |
(2,033 |
) |
Income tax expense |
|
67 |
|
|
51 |
|
|
|
71 |
|
|
105 |
|
Gain (loss) on
insurance proceeds |
|
- |
|
|
129 |
|
|
|
- |
|
|
(8,706 |
) |
Other income |
|
(49 |
) |
|
(43 |
) |
|
|
(128 |
) |
|
(57 |
) |
Interest expense |
|
103 |
|
|
59 |
|
|
|
166 |
|
|
115 |
|
Operating
loss |
|
(9,389 |
) |
|
(5,369 |
) |
|
|
(17,548 |
) |
|
(10,576 |
) |
Depreciation
expense |
|
1,302 |
|
|
2,376 |
|
|
|
2,563 |
|
|
4,628 |
|
Acquisition related
amortization expense |
|
972 |
|
|
965 |
|
|
|
1,944 |
|
|
1,936 |
|
Acquisition related
compensation expense, net of contingency adjustment |
|
1,118 |
|
|
(319 |
) |
|
|
2,240 |
|
|
590 |
|
Adjusted
EBITDA |
$ |
(5,997 |
) |
$ |
(2,347 |
) |
|
$ |
(10,801 |
) |
$ |
(3,422 |
) |
The Company believes that etailz adjusted income 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.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 EntertainmentJohn
Anderson
Chief Financial Officer (518)
452-1242
Contact:Financial
Relations BoardMarilynn
Meek
(mmeek@frbir.com)(212)
827-3773
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