8-K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): August 21, 2014

TRANS WORLD ENTERTAINMENT
CORPORATION

(Exact name of registrant as specified in its charter)

New York	0-14818	14-1541629
(State or other jurisdiction of incorporation or organization)	(Commission file number)	(I.R.S. Employer Identification No.)

38 Corporate Circle,
Albany, New York 12203
(Address of principal executive offices)

(518) 452-1242
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

£	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
£	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
£	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
£	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION

On August 21, 2014, the Company issued a press release announcing its financial results for its fiscal second quarter ended August 2, 2014.  A copy of the Company’s press release is furnished with this report as Exhibit 99.1, and is incorporated herein by reference.

In accordance with General Instruction B.2 of Form 8-K, the information in this Item 2.02 and Exhibit 99.1 of this Current Report on Form 8-K is being furnished and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that Section. Furthermore, such information, including Exhibit 99.1 attached hereto, shall not be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

ITEM 7.01. REGULATION FD DISCLOSURE

Attached hereto as Exhibit 99.2 is the transcript for the earnings conference call of the Company held on August 21, 2014. The information in this Current Report on Form 8-K, including Exhibit 99.2 attached hereto, shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section. Furthermore, such information, including Exhibit 99.2 attached hereto, shall not be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing.

Certain information contained in this Current Report on Form 8-K, including information in Exhibit 99.2 hereto, is forward-looking information based on current expectations and plans that involve risks and uncertainties. Forward-looking information includes, among other things, statements concerning results of operations and the Company’s strategies. The Company cautions that there are factors that can cause actual results to differ materially from the forward-looking information that has been provided. The reader is cautioned not to put undue reliance on this forward-looking information, which is not a guarantee of future performance and is subject to a number of uncertainties and other factors, many of which are outside the control of the Company; accordingly, there can be no assurance that such suggested results will be realized. For a list of the Company’s risk factors, see the Company’s annual filing on Form 10-K with the Securities and Exchange Commission for the year ended February 1, 2014.

ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS

(c) EXHIBITS. The following are furnished as Exhibits to this Report:

Exhibit No.	Description
99.1	Trans World Entertainment Corporation Press Release dated August 21, 2014.
99.2	Trans World Entertainment Corporation Transcript for Earnings Call held on August 21, 2014.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	TRANS WORLD ENTERTAINMENT CORPORATION
Date: August 22, 2014	/s/ John Anderson
	John Anderson
	Chief Financial Officer

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EXHIBIT INDEX

Exhibit No.	Description
99.1	Trans World Entertainment Corporation Press Release dated August 21, 2014.
99.2	Trans World Entertainment Corporation Transcript of Earnings Call held on August 21, 2014.

EX-99.1

Exhibit 99.1

	Contact:	Contact:
	Trans World Entertainment	Financial Relations Board
	John Anderson	Marilynn Meek
	Chief Financial Officer	(mmeek@frbir.com)
	(518) 452-1242	(212) 827-3773

38 Corporate Circle
Albany, NY 12203
www.twec.com	NEWS RELEASE

TRANS WORLD ENTERTAINMENT ANNOUNCES SECOND QUARTER RESULTS

Albany, NY, August 21, 2014 -- Trans World Entertainment Corporation (Nasdaq: TWMC) today reported financial results for its second quarter ended August 2, 2014. For the second quarter of 2014, the Company reported a net loss of $5.1 million, or a loss of $0.16 per diluted share, compared to a net loss of $2.5 million, or a loss of $0.08 per diluted share, for the same period last year.

Comparable store sales for the quarter were down 3.4% compared to the same quarter last year. Total sales for the quarter decreased 11.0% to $71.9 million compared to $80.8 million in 2013. During the quarter, the Company operated an average of 328 stores compared to 353 last year, a 7.1% decline in store count which resulted in an 8.8% decline in total square footage in operation. During the quarter the Company opened or relocated 4 stores and closed 10 stores.

Gross profit for the quarter was $28.0 million, or 39.0% of sales, as compared to $32.0 million, or 39.6% of sales for the same period last year. The decrease in gross profit as a percentage of sales was due to distribution and freight expenses.

Selling, general and administrative (“SG&A”) expenses decreased 4.2% for the quarter to $31.8 million compared to $33.2 million for the comparable period last year. The reduction in SG&A expenses was due to fewer stores in operation. As a percentage of sales, SG&A expenses were 44.2% versus 41.1% for the same period last year. The increase in SG&A as a percentage of sales is primarily due to fixed expenses on the sales decline.

For the twenty-six weeks ended August 2, 2014, total sales decreased 8.9% to $159.1 million, compared to $174.7 million for the same period in 2013. Comparable store sales for the twenty-six weeks ended August 2, 2014 decreased 1.4% compared to the same period last year. Net loss for the twenty-six week period was $5.5 million, or a loss of $0.17 per diluted share, compared to a net loss of $0.9 million, or $0.03 per diluted share, for the same period last year.

Gross profit for the twenty-six weeks ended August 2, 2014 was $60.8 million, or 38.2% of sales, compared to $67.8 million, or 38.8%, of sales for the same period last year.

For the twenty-six weeks ended August 2, 2014, SG&A expenses decreased 3.6% to $63.6 million compared to $66.0 million in the comparable period last year. As a percentage of sales, SG&A expenses were 40.0% versus 37.8% for the same period last year.

Cash on hand at the end of the quarter was $82.4 million, compared to $95.3 million at the end of the second quarter last year. Inventory was $134.6 million at the end of the quarter versus $151.5 million at the end of the second quarter last year, a decline of 11.1%.

“Despite the challenging results for the quarter, we are approaching the second half optimistically as we completed many of our merchandising initiatives which resulted in improved results in July. The Company continues to improve its cash flow from operations through disciplined inventory management and the Company has returned over $20 million to our shareholders over the last 12 months, including the payment of a $16 million special dividend in the first half this year,” said Robert J. Higgins, Chairman and Chief Executive Officer.

“I’m also pleased to announce that last week we opened our new entertainment concept store in Woodbridge, New Jersey. We are excited by the concept which offers a much broader assortment of non-media product in a visually exciting layout and continues our transformation to a complete entertainment destination,” Mr. Higgins concluded.

During the second quarter the Company repurchased approximately 318,000 shares of common stock at an average price of $3.42 per share, for an aggregate purchase price of approximately $1.1 million. Since the inception of the program, the Company has repurchased approximately 1.1 million shares of common stock at an average price of $4.03 per share, for an aggregate purchase price of approximately $4.5 million. The Company has approximately $17.5 million available for purchase under its repurchase program.

Trans World will host a teleconference call today, Thursday, August 21, 2014, 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 is a leading specialty retailer of entertainment products, including music, video, trend, electronics, video games and related products. The Company operates retail stores in the United States and Puerto Rico, primarily under the names f.y.e. for your entertainment and Suncoast and on the web at www.fye.com, www.wherehouse.com, and www.secondspin.com.

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.

— table to follow —

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TRANS WORLD ENTERTAINMENT CORPORATION

Financial Results

STATEMENTS OF OPERATIONS:

(in thousands, except per share data)

	Thirteen Weeks Ended												Twenty-six Weeks Ended
	August 2 2014			% to Sales			August 3 2013			% to Sales			August 2 2014			% to Sales			August 3 2013			% to Sales
Net sales	$	71,908					$	80,768					$	159,124					$	174,702
Cost of sales		43,861			61.0	%		48,754			60.4	%		98,300			61.8	%		106,899			61.2	%
Gross profit		28,047			39.0	%		32,014			39.6	%		60,824			38.2	%		67,803			38.8	%
Selling, general and administrative expenses		31,762			44.2	%		33,157			41.1	%		63,612			40.0	%		65,992			37.8	%
Depreciation and amortization		858			1.1	%		861			1.0	%		1,640			1.0	%		1,685			1.0	%
Income (loss) from operations		(4,573	)		-6.3	%		(2,004	)		-2.5	%		(4,428	)		-2.8	%		126			0.1	%
Interest expense, net		476			0.7	%		487			0.6	%		960			0.6	%		970			0.6	%
Income (loss) before income taxes		(5,049	)		-7.0	%		(2,491	)		-3.1	%		(5,388	)		-3.4	%		(844	)		-0.5	%
Income tax expense		47			0.1	%		48			0.0	%		94			0.1	%		96			0.1	%
Net income (loss)	$	(5,096	)		-7.1	%	$	(2,539	)		-3.1	%	$	(5,482	)		-3.5	%	$	(940	)		-0.6	%
Basic income (loss) per common share:
Basic income (loss) per share	$	(0.16	)				$	(0.08	)				$	(0.17	)				$	(0.03	)
Weighted average number of common shares outstanding - basic		31,831						33,147						31,961						32,717
Diluted income (loss) per common share:
Diluted income (loss) per share	$	(0.16	)				$	(0.08	)				$	(0.17	)				$	(0.03	)
Weighted average number of common shares outstanding - diluted		31,831						33,147						31,961						32,717
SELECTED BALANCE SHEET CAPTIONS: (in thousands, except store data)													August 2 2014						August 3 2013
Cash and cash equivalents													$	82,401					$	95,252
Merchandise inventory														134,600						151,451
Fixed assets (net)														15,821						11,654
Accounts payable														42,382						50,309
Borrowings under line of credit														—						—
Long-term capital lease, less current portion														351						1,488
Stores in operation, end of period														327						355
Stores in operation, average during the period														328						353

EX-99.2

Exhibit 99.2

TWE ANALYST CONFERENCE CALL AUGUST 21, 2014

Operator

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Trans World Entertainment second-quarter 2014 results conference call. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host for today’s presentation, Bob Higgins, Chairman and CEO of Trans World Entertainment. Sir, please begin.

Bob Higgins - Trans World Entertainment Corporation - Chairman and CEO

Thank you, Howard. Good morning, everyone. Thank you for joining us as we discuss our second-quarter and first-half results. On the call with me today is John Anderson, our Chief Financial Officer.

For the second quarter, our net loss was $5.1 million as compared to a net loss of $2.5 million in the second quarter of 2013. For the first half, our net loss was $5.5 million compared to a net loss of $900,000 during the same period in 2013.

For the second quarter, our comp store sales were down 3.4%. Total sales for the quarter decreased 11% to $72 million compared to last year’s $81 million, as our stores in operation declined by 7% and total square footage in operation declined by 9%. Sales during the quarter were negatively impacted by continued declines in mall traffic and weakness in the music category, partially offset by positive comps in our trend, electronics, and game categories.

Now I will touch on our sales performance by category for the quarter. Video comp sales were down 1%. Double-digit increases in Blu-ray were offset by declines in DVD. Video represented 44% of our business during the quarter, the same level as last year.

Music comp sales declined 12%. The music category represented 29% of our business for the quarter compared to 32% last year. While music performed poorly overall, we have seen an encouraging result from the expansion of our vinyl product in many of our stores.

Trend comp sales increased 5%. Trend sales represented 13% of our business for the quarter compared to 10% last year.

Electronics comp sales increased 1%. Electronics represented 10% of our business for the quarter compared to 9% last year.

Video game comp sales were up 6% for the quarter. Game sales represented 4% of the business for the quarter versus 3% last year.

Now John will take you through the financial results for the quarter. John?

John Anderson - Trans World Entertainment Corporation - CFO

Thanks, Bob. Good morning.

Our net loss for the quarter was $5.1 million or $0.16 per diluted share as compared to last year’s net loss of $2.5 million or $0.08 per diluted share. For the first half we reported a net loss of $5.5 million compared to a net loss of $940,000 last year.

EBITDA for the quarter was a loss of $3.7 million compared to a loss of $1.1 million last year. For the first half, EBITDA was a loss of $2.8 million compared to a gain of $1.8 million last year.

Our gross margin rate for the quarter decreased 60 basis points from last year to 39% of sales. The decrease in gross profit as a percent of sales was due to the deleveraging of distribution and freight costs on lower sales and the impact of the shift in our product mix towards non-media products.

SG&A expenses were $31.8 million, a reduction of $1.4 million or 4.2% from last year’s second quarter. The decrease in SG&A expenses was driven by the reduction in store count.

SG&A expenses as a percentage of sales was 44.2% compared to 41.1% for the same period last year. The increase in SG&A as a percent of sales is primarily due to the deleveraging of occupancy and corporate overhead expenses resulting from that sales decline. Net interest expense was $476,000 in the quarter versus $487,000 last year.

In the past 12 months the Company has returned over $20 million to our shareholders, including the payment of a special dividend of $16 million and repurchase of $4.5 million in Company shares. We ended the quarter with cash of $82 million compared to $95 million last year, and the Company continued to improve its cash flow from operation through disciplined inventory management.

Year over year, we have lowered our inventory by $17 million and finished the quarter with $135 million in inventory, 11% below last year’s $151 million. On a per-square-foot basis, inventory was $70 versus $71 last year. We ended the quarter with 327 stores and 1.9 million square feet in operation versus last year’s 355 stores and 2.1 million square feet.

Now I will turn it back over to Bob.

Bob Higgins - Trans World Entertainment Corporation - Chairman and CEO

Thanks, John. Despite challenging results, there were several highlights for this quarter. In trend we continue to drive positive comp sales as we capitalize on broad-based entertainment franchises such as Frozen, Dr. Who, and superheroes. Our performance in the trend category highlights our ability to sell entertainment-related merchandise from non-media categories and to market our stores as a complete entertainment destination.

In electronics we were able to drive positive comps, as we broadened our product mix in portable speakers and mobile accessories. In video, we continued to drive the catalog businesses in both DVD and Blu-ray through a solid selection of titles and strong value statement, like capitalizing on new releases.

In music we continue to outperform the industry as competitors exit the business, driven by the depth of our selection and a strong value statement, while at the same time we are rightsizing our inventory to focus on our total product mix and growing categories. We continue to maintain strong gross margin rates in our merchandise categories through disciplined markdown management.

We continue to identify opportunities to enhance the current shopping experience. Just last week we opened our new entertainment concept store in Woodbridge, New Jersey, in the Woodbridge Mall. We are excited by the concept, which offers a much broader assortment of non-media product and a visually exciting layout and continues our transformation towards becoming a complete entertainment destination. While it is too early to comment on the store’s performance, we were pleased by the customer response and would encourage everyone on the call to visit the store.

We are approaching the second half optimistically, as we completed many of our merchandising initiatives which resulted in improved results in July. We have an exciting lineup of entertainment-related product planned and are preparing to deliver value and an exceptional shopping experience to our customers this holiday season.

Given the competitive changes occurring in our industry, we are also in a position to capitalize on opportunities in our core categories of music and video. In addition, we will continue to aggressively seize opportunities to drive our sales and operating profits to investments in new and expanding categories.

Now I would like to open up the call for any questions that anybody might have. Howard, could you take care of that for us?

Operator

Yes, sir. (Operator Instructions) William Meyers, Miller Asset Management.

William Meyers - Miller Asset Management - Analyst

So I guess my first question would be about the music category. We have discussed how this has been declining. Everyone knows it has been declining in the industry over the years, and it’s still a pretty substantial part of your floorspace, I would think. So just any thoughts on going forward?

And also, how much floorspace are you devoting to -- you mentioned vinyl. Are you devoting very much floorspace to that? Or is that just a still very small category?

Bob Higgins - Trans World Entertainment Corporation - Chairman and CEO

We are devoting 6 feet to 8 feet to vinyl. But in some stores, we have got bigger departments; and in those stores we are doing better with it. So we are going to watch it carefully.

We know the freestanding stores can do it very well in the business. And we are watching those carefully, also. So we will expand it as appropriate. And we think we will -- we have got significant expansion plans in that category.

As far as your first question, I think we are ahead of the curve on that. We are reducing the size of the music departments. And we have found that even though we are taking out a fair amount of inventory, it’s not hurting sales at all. So we are reducing space but still doing the same volume.

And I’d like to point out that in Woodbridge, where we have put it to the back of the store -- we put both the video and music to the back of the store -- we are still comping up on those categories. So that was encouraging to see.

William Meyers - Miller Asset Management - Analyst

Okay. That sounds good. Just a question about the -- there’s been a few localities and a lot of talk about increasing minimum wages in various places. Have you seen any effect from that? And would that have much of an effect on your expenses, if more of that happened?

Bob Higgins - Trans World Entertainment Corporation - Chairman and CEO

I’ll let John answer that.

John Anderson - Trans World Entertainment Corporation - CFO

Yes. It definitely is starting to have a small effect on us. It kind of accelerates in future years. So it is something we are keeping an eye on. But it’s not going to be overly material to us in the totality of the Company.

William Meyers - Miller Asset Management - Analyst

Okay. And so you are pretty happy with your staffing levels as they are.

John Anderson - Trans World Entertainment Corporation - CFO

Yes.

William Meyers - Miller Asset Management - Analyst

Okay. Well, that is all for me. Congratulations on the quarter.

Bob Higgins - Trans World Entertainment Corporation - Chairman and CEO

Thank you.

Operator

(Operator Instructions) Mr. Higgins, I am showing no additional audio questions at this time. I will turn the conference back over to you.

Bob Higgins - Trans World Entertainment Corporation - Chairman and CEO

Okay. Thank you very much. We are planning on taking advantage of some of the changes we have made. As William Meyers mentioned, the change in -- we felt that we should make that change in music, also, and we’ve already made that change. We have done it in about half the chain. And the other half of the chain will be done by the end of September. So it’s already been given to the field to handle that.

I would like to take this opportunity to thank everyone for their dedication to our Company: our customers, vendors, and shareholders, especially our Trans World associates. We look forward to talking to you about our third-quarter results on November 20. Thank you very much, Howard.

Operator

Thank you, sir. Ladies and gentlemen, thank you for participating in today’s conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.