- Comparable store sales for the second quarter were flat compared to the same quarter last year as a 40% comp increase in our trend category offset a 12% decline in our heritage media categories. The trend category represented 29% of business for the quarter as compared to 19% last year.
- Total revenue for the quarter decreased 6.1% to $64.3 million compared to $68.5 million for the same period last year. At the end of the quarter, the Company operated 290 stores compared to 308 stores at the same time last year, a 5.8% decline.
- Gross profit for the quarter was $26.7 million, or 41.5% of revenue, compared to $28.2 million, or 41.2% of revenue, for the same period last year. The increase in gross profit as a percentage of revenue was due to the increased revenue contribution from the higher margin trend category and increased margins in the trend and electronics categories.
- Selling, general and administrative ("SG&A") expenses decreased approximately $200 thousand, or 0.5%, for the quarter to $29.6 million, or 46.0% of revenue, compared to $29.8 million, or 43.4% of revenue, for the same period last year. SG&A in the Second Quarter of 2015 was reduced by $1.4 million, or a 200 basis point benefit due to the one-time reimbursement of expenses related to a legal settlement.
- Cash on hand at the end of the quarter was $78.6 million compared to $91.4 million at the end of the second quarter last year. The decline in cash was due to the repurchase of shares, investments in new and remodeled stores, the chain wide rollout of new marketplace fixtures to support the shift in our merchandise assortment and technology enhancements, including the rollout of a new point of sale system.
- Since the end of the second quarter last year, the Company has spent $3.3 million to repurchase shares under its repurchase program.
- Capital spending was $7.7 million for the twenty-six weeks ended July 30, 2016, compared to $8.0 million for the same period last year. Since the end of the second quarter last year, the Company has spent $20.3 million in capital expenditures to support strategic initiatives and necessary technology enhancements.
Twenty-six weeks ended July 30, 2016 Overview
- For the twenty-six weeks ended July 30, 2016, the Company reported a net loss of $4.6 million or $0.15 per diluted share, as compared to a net loss of $2.9 million, or $0.09 per diluted share, for the same period last year. Adjusted EBITDA (a non GAAP measure) for the twenty-six weeks ended July 30, 2016 (note 1) was a loss of $2.1 million as compared to a loss of $1.2 million for the same period of 2015.
- For the twenty-six weeks ended July 30, 2016, total revenue decreased 5.2% to $140.1 million, compared to $147.7 million for the same period last year. Comparable store sales for the twenty-six weeks ended July 30, 2016 were flat compared to the same period last year.
- Gross profit for the twenty-six weeks ended July 30, 2016 was $57.5 million, or 41.1% of revenue, compared to $60.2 million, or 40.8%, of revenue for the same period last year.
- For the twenty-six weeks ended July 30, 2016, SG&A expenses decreased $500 thousand, or 0.8% to $59.6 million compared to $60.1 million in the comparable period last year. As a percentage of revenue, SG&A expenses were 42.6% versus 40.7% for the same period last year. SG&A in the twenty-six weeks of 2015 was reduced by $1.4 million, or a 90 basis point benefit due to the one-time reimbursement of expenses related to a legal settlement. In addition, higher health insurance costs for the twenty-six weeks of 2016 contributed to a 50 basis point increase in SG&A as a percentage of sales.
- Inventory was $120.3 million, or $72 per square foot, at the end of the quarter, versus $124.5 million, or $69 per square foot, at the end of the second quarter last year.
- Reconciliation of net loss to adjusted EBITDA: Adjusted EBITDA is defined as net earnings from continued operations, adjusted to exclude: (i) income tax; (ii) other expense (income); (iii) interest expense; (iv) depreciation and amortization; and (v) items not reflective of the core operations of the business. 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, net earnings from continuing operations or cash flows from operating activities, as determined in accordance with GAAP. 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. A reconciliation of net loss to adjusted EBITDA appears below.
|Thirteen Weeks Ended||Twenty-six Weeks Ended|
|July 30,||August 1,||July 30,||August 1,|
|Income tax expense||48||44||95||89|
|Depreciation and amortization||1,623||1,047||3,086||2,011|
|One-time reimbursement of expenses related to a legal settlement||-||(1,367||)||-||(1,367||)|
|TRANS WORLD ENTERTAINMENT CORPORATION|
|STATEMENTS OF OPERATIONS:|
|(in thousands, except per share data)|
|Thirteen Weeks Ended||Twenty-six Weeks Ended|
|July 30,||% to||August 1,||% to||July 30,||% to||August 1,||% to|
|Cost of sales||37,647||58.5||%||40,293||58.8||%||82,551||58.9||%||87,454||59.2||%|
|Selling, general and|
|Depreciation and amortization||1,623||2.4||%||1,047||1.5||%||3,086||2.2||%||2,011||1.4||%|
|Income (loss) from operations||(4,522||)||-6.9||%||(2,560||)||-3.7||%||(5,207||)||-3.7||%||(1,883||)||-1.3||%|
|Income (loss) before income taxes||(4,608||)||-7.2||%||(3,001||)||-4.4||%||(4,535||)||-3.2||%||(2,762||)||-1.9||%|
|Income tax expense||48||0.1||%||44||0.1||%||95||0.1||%||89||0.1||%|
|Basic and diluted loss per common share:|
|Basic and diluted loss per share||$||(0.15||)||$||(0.10||)||$||(0.15||)||$||(0.09||)|
|Weighted average number of|
|common shares outstanding - basic and diluted||30,403||31,196||30,576||31,202|
|SELECTED BALANCE SHEET CAPTIONS:||July 30,||August 1,|
|(in thousands, except store data)||2016||2015|
|Cash and cash equivalents||$||78,644||$||91,400|
|Fixed assets (net)||34,990||21,441|
|Borrowings under line of credit||-||-|
|Stores in operation, end of period||290||308|
|Stores in operation, average during the period||292||310|
Contact:Trans World EntertainmentJohn AndersonChief Financial Officer(518) 452-1242Financial Relations BoardMarilynn Meek (email@example.com)(212) 827-3773