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): May 19, 2016

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:

o Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

o Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

o Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

o 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 May 19, 2016, Trans World Entertainment Corporation issued a press release announcing its financial results for its fiscal first quarter ended April 30, 2016. A copy of Trans World Entertainment Corporation’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 Current Report on Form 8-K is being furnished under Item 2.02 and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of such section, nor shall such information be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act.

ITEM 7.01. REGULATION FD DISCLOSURE

Attached hereto as Exhibit 99.2 is the transcript for the earnings conference call of Trans World Entertainment Corporation held on May 19, 2016. The information in this Current Report on Form 8-K, including the exhibit attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities under that Section. Furthermore, such information, including the exhibit 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 Trans World Entertainment Corporation’s strategies. Trans World Entertainment Corporation 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 Trans World Entertainment Corporation; accordingly, there can be no assurance that such suggested results will be realized. For a list of Trans World Entertainment Corporation’s risk factors, see the Company’s Annual Filing on Form 10-K with the Securities and Exchange Commission for the year ended January 30, 2016.

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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 May 19, 2016.
99.2	Trans World Entertainment Corporation Transcript for Earnings Call held on May 19, 2016.

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:  May 20, 2016	/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 May 19, 2016.
99.2	Trans World Entertainment Corporation Transcript for Earnings Call held on May 19, 2016.

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 RELEASEE 

TRANS WORLD ENTERTAINMENT ANNOUNCES FIRST QUARTER RESULTS

Reports flat comparable store sales and historically high gross margin for the First Quarter

Albany, NY, May 19, 2016 -- Trans World Entertainment Corporation (Nasdaq: TWMC) today reported financial results for its first quarter ended April 30, 2016.

“The quarter was highlighted by the continued positive response by our customers to changes in our merchandise assortment and presentation.” commented Mike Feurer, Company CEO. “We delivered a flat comp for the fourth consecutive quarter despite the continued significant disruption in our media categories. In addition, we generated historically high gross margins through better price management and the shift in sales contribution to our higher margin trend category. While there is still work to be done, our progress validates we are successfully leveraging our heritage, industry relationships and hard earned credibility with our customers to achieve our vision.” Mr. Feurer added.

First Quarter Overview

· For the first quarter of 2016, the Company reported net income of $27 thousand, or $0.00 per diluted share, compared to a net income of $194 thousand, or $0.01 per diluted share, for the same period last year.

· Comparable store sales for the first quarter were flat compared to the same quarter last year. Total revenue for the quarter decreased 4.3% to $75.7 million compared to $79.2 million for the same period last year. At the end of the quarter, the Company operated 290 stores compared to 310 stores last year, a 6.5% decline.

· Gross profit for the quarter was $30.8 million, or 40.7% of revenue, compared to $32.0 million, or 40.4%, 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 increases across all of our merchandise categories.

· Selling, general and administrative (“SG&A”) expenses decreased $0.3 million for the quarter to $30.1 million, or 39.7% of sales, compared to $30.4 million, or 38.4% of sales, for the same period last year. The increase in SG&A as a percentage of sales is primarily due to a 90 basis point increase in health care costs.

· Other income primarily consisted of a one-time gain of $0.8 million from the sale of an investment.

· Included in operating results is the impact of a new lease for the Company’s distribution facility and corporate offices. The new lease reduces annual payments by $1 million. The new lease is accounted for as an operating lease with the distribution facility portion increasing cost of sales by $0.2 million, or 30 basis points, and corporate office portion increasing SG&A expenses by $0.1 million or 10 basis points. The previous lease was accounted for as a capital lease with the payment recorded as interest expense and a reduction of short-term debt.

· Inventory was $116.6 million, or $70 per square foot, at the end of the quarter, versus $121.6 million, or $68 per square foot, at the end of the first quarter last year. The increase in inventory per square foot is in-line with our strategy of shifting our mix to higher margin categories.

· Cash on hand at the end of the quarter was $91 million, compared to $103 million at the end of the first quarter last year. The decline was due to the repurchase of shares and 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.

· During the first quarter, the Company repurchased 676,000 shares of common stock at an average price of $3.85 per share. Since the inception of the program, the Company has repurchased approximately 2.5 million shares of common stock at an average price of $3.82 per share. The Company has approximately $12.2 million dollars available for purchase under its repurchase program.

Trans World will host a teleconference call today, Thursday, May 19, 2016, 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 video, music, 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 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)

	Fiscal Quarter Ended
	April 30,			% to			May 2,			% to
	2016			Revenue			2015			Revenue
Net sales	$	74,768					$	77,963
Other revenue		962						1,200
Total revenue	$	75,730					$	79,163
Cost of sales		44,904			59.3	%		47,161			59.6	%
Gross profit		30,826			40.7	%		32,002			40.4	%
Selling, general and administrative expenses		30,048			39.7	%		30,362			38.4	%
Depreciation and amortization		1,463			1.9	%		964			1.2	%
Income from operations		(685	)		-0.9	%		676			0.9	%
Interest expense		173			0.2	%		465			0.6	%
Other income		(932	)		-1.2	%		(27	)		0.0	%
Income before income taxes		74			0.1	%		238			0.3	%
Income tax expense		47			0.1	%		44			0.1	%
Net Income	$	27			0.0	%	$	194			0.2	%
Basic Income per common share:
Basic Income per share	$	0.00					$	0.01
Weighted average number of common shares outstanding - basic		30,761						31,208
Diluted Income per common share:
Diluted Income per share	$	0.00					$	0.01
Weighted average number of common shares outstanding - diluted		30,930						31,371
SELECTED BALANCE SHEET CAPTIONS:	April 30,						May 2,
(in thousands, except store data)	2016						2015
Cash and cash equivalents	$	90,856					$	102,539
Merchandise inventory		116,648						121,577
Fixed assets, net		33,198						18,026
Accounts payable		40,903						44,592
Borrowings under line of credit		—						—
Stores in operation, end of period		290						310
Average stores in operation, end of period		295						311

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EX-99.2

Exhibit 99.2

Trans World Entertainment’s Earnings Call Transcript

Operator

Welcome to Trans World Entertainment Corporation First Quarter 2016 Results Conference Call. [Operator Instructions]. It is now my pleasure to introduce your host, Mr. Mike Feurer, Chief Executive Officer. Thank you. You may begin.

Mike Feurer

Thank you, Adam. Good morning. Thank you for joining us as we discuss our first quarter results. On the call with me today are John Anderson, our Chief Financial Officer and Scott Hoffman, our Chief Merchandising Officer. Before John reviews our financial results, I’d like to provide highlights from this past year. We are encouraged with the continued progress made in the first quarter as demonstrated by our fourth consecutive quarter of flat comp sales, our customers continue to react positively to the changes we are making to our merchandise assortments and presentation in our stores. The 65% comp in our trend category offset the continued declines in our heritage media categories. We generated historically high gross margins through better costing and price management and the shift in sales contribution to our higher margin trend category.

In addition, we remodeled three stores under our new format bringing the total number of stores operating with the new format to 13. We continue to be encouraged by the performance of the new format stores. These stores further capitalize on our unique and wide ranging demographic, the strength of our sales team, our longstanding credibility in the entertainment space and the loyalty of our customers. We continue to make progress in our evolution to become the leading entertainment in pop culture centric experience in the marketplace.

Now John will take you through financial highlights for the first quarter.

John Anderson

Thanks, Mike. Good morning. For the first quarter comparable sales were flat. Total revenue for the quarter was $75.7 million, a decrease of 4.3% compared to last year. Stores in operation decreased 6.5%. Gross profit for the quarter was $30.8 million or 40.7% of sales compared to $32 million or 40.4% of sales for the same period last year. The increase in gross profit as a percent of sales was due to increased sales contribution from the higher margin trend category and increases across all of our merchandising categories. SG&A expenses decreased $314,000 for the quarter to $30.1 million or 39.7% of sales compared to $30.4 million or 38.4% of sales for the same period last year.

The increase in SG&A expense as a percent of sales was primarily due to a 90 basis point increase in healthcare costs. EBITDA for the quarter was $778,000 as compared to $1.6 million last year. Other income was $932,000 compared to $27,000 last year. Other Income included a onetime gain of $800,000 for the sale of an investment. The remaining balance consisted of interest income, net interest expense was $173,000 for the quarter as compared to $465,000 last year. For the quarter our net income was $27,000 or $0.00 per diluted share as compared to a net income of $194,000 or $0.01 per diluted share in the first quarter of 2015.

Included in operating results is the impact of the new lease for our company’s distribution facility and corporate office. The new lease reduces annual payments by $1 million. The lease is accounted for as an operating lease with the distribution facility portion increasing cost of sales by $230,000 or 30 basis points and the corporate office portion increasing SG&A expenses by $92,000 or 10 basis points. The previous lease was accounted for the capital lease with the payment recorded as interest expense and a reduction of short term debt. We ended the quarter with $91 million in cash compared to $103 million last year. The decline was due to the repurchase of shares and also investments in new and remodel stores, the chain wide rollout of the new marketplace fixtures that supports the shift in our merchandising assortment and technology enhancements.

During the first quarter the company repurchased 676,000 shares of common stock at an average price of $3.85 per share. Since the inception of the program, the company has repurchased approximately $2.5 million shares of common stock at an average price of $3.82 per share. The company has approximately $12.2 million available for purchase under its repurchase program. Also year-over-year we have lowered our inventory by $5 million and finished the quarter with $117 million in the inventory, 4% below last year’s $122 million.

On a per square foot basis inventory was $70 compared to $68 at the end of the first quarter last year. The increase in inventory per square foot is in line with our strategy of shifting our mix to higher margin categories. We ended the quarter with 290 stores as compared to 310 stores last year, a 6.5% reduction. Square footage and operation declined 7% to 1.7 million square feet as compared to 1.8 million square feet last year.

Now Scott will take you through our merchandising sales highlights.

Scott Hoffman

Thanks, John. Good morning. I will now review our results by category. Despite the material declines in the media categories, our comparable sales for Q1 were flat as compared to last year and represents

the fourth consecutive quarter with flat comp sales. In our trend category, comp sales increased 65%. We continue to take advantage of opportunities to strengthen our selection and shift our mix to growing categories of entertainment and pop culture related merchandise. Trend sales represented 26% of our business for the quarter compared to 14% last year.

Video comp sales decreased 13% for the quarter. Video represented 40% of our business during the quarter as compared to 46% last year. Music comp sales declined 11%. Within the music category we are seeing continued growth in vinyl which is helping to offset declines in CD’s. The music category represented 24% of our business for the quarter compared to 27% last year. Electronics comp sales were flat for the quarter, electronic sales represented 9% of our business for the quarter, same percentage as last year. We continue to focus on optimizing gross profit in this category while enhancing our merchandise selection. Videogames comp sales were down 55%, game sales represented 1% of our business for the quarter compared to 3% last year.

Now I will turn it back over to Mike.

Mike Feurer

Thanks, Scott. While there is still work to be done our progress validates that we are successfully leveraging our heritage industry relationships and hard earned credibility with our customers to achieve our vision. We are utilizing our financial strength to improve the customer experience and elevate our brand by making investments in people, process, technology and strategic partnerships. In addition, we are evolving our merchandise assortment and presentation and providing customer service guided by an approach to engage every customer with gratitude, humility, and respect. We’re encouraged by the progress we’ve made and look to capitalize on the momentum we’ve generated. For 2016, we will continue to deliver on our vision of becoming the most compelling entertainment and pop culture centric engagement in the marketplace guided by the following priorities:

Champion a culture of innovation, experimentation and driving the business, engage complimentary world class talents to capitalize on strategic opportunities, elevate the brand and customer experience, evolve and deploy the economical repeatable, omni-channel model for the future, modernize our technological capability and engage dynamic alliances and collaborations required to unlock the full potential of Trans World Entertainment. Now I would like to open the call to questions.

Question-and-Answer Session

Operator

[Operator Instructions]. Our first question comes from the line of William Meyers from Miller Asset Management. Please go ahead.

William Meyers

Let’s see on the video games, are you basically exiting that business?

Scott Hoffman

The games business has been a down trending business for quite some time and it’s a very small portion of our business and we continue to look for opportunities in the world of games as it relates to specific games but also all of the merchandise that works back to games that we have in our trend category.

Mike Feurer

Clearly, we see that as an opportunity from a lifestyle standpoint and have seen success there, William.

William Meyers

Okay. So there is video game related revenue in the trend category just not in the actual video games category?

Scott Hoffman

Yes, there is and as Mike said a continued growth business for us as we look at games as a lifestyle business not just the physical game.

William Meyers

On the video and music, what is the competition like? Are those just continuing to trend down mainly because of the download competition or are you seeing any kind of competition or exit from the business by other people who are carrying the physical media?

Mike Feurer

We all understand what’s happening with regards to the digital download and streaming. I think that’s the lion’s share of what everyone is experiencing, that being said, we are actually very encouraged by, again the lifestyle aspect and our heritage relative to the music and film industries allowing us to pivot

and distort these opportunities in our stores. Great opportunity to continue to engage with this tremendously passionate customer just in different ways.

William Meyers

Okay. And just a last question, so you would presume that trend is just going to continue to become a larger and larger percentage of your businesses as we go through time?

Scott Hoffman

Yes.

Operator

[Operator Instructions]. Ladies and gentlemen we have no further questions in queue at this time. I would like to turn the floor back over to management for closing comments.

Mike Feurer

Thank you, Adam and thanks William. I’d like to take this opportunity to thank everyone for their dedication to our company, our customers, vendors, shareholders and our Trans World associates. We look forward to talking to you about our second quarter results on August 18th. Thank you.

Operator

Thank you ladies and gentlemen. This does conclude our teleconference for today. You may now disconnect your lines at this time. Thank you for your participation and have a wonderful day.