0000930413-19-001086.txt : 20190329 0000930413-19-001086.hdr.sgml : 20190329 20190329141317 ACCESSION NUMBER: 0000930413-19-001086 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20190328 ITEM INFORMATION: Results of Operations and Financial Condition ITEM INFORMATION: Regulation FD Disclosure ITEM INFORMATION: Financial Statements and Exhibits FILED AS OF DATE: 20190329 DATE AS OF CHANGE: 20190329 FILER: COMPANY DATA: COMPANY CONFORMED NAME: TRANS WORLD ENTERTAINMENT CORP CENTRAL INDEX KEY: 0000795212 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL- COMPUTER & PRERECORDED TAPE STORES [5735] IRS NUMBER: 141541629 STATE OF INCORPORATION: NY FISCAL YEAR END: 0131 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-14818 FILM NUMBER: 19715548 BUSINESS ADDRESS: STREET 1: 38 CORPORATE CIRCLE CITY: ALBANY STATE: NY ZIP: 12203 BUSINESS PHONE: 5184521242 MAIL ADDRESS: STREET 1: 38 CORPORATE CIRCLE CITY: ALBANY STATE: NY ZIP: 12203 FORMER COMPANY: FORMER CONFORMED NAME: TRANS WORLD MUSIC CORP DATE OF NAME CHANGE: 19920703 8-K 1 c93341_8k.htm

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): March 28, 2019

 

 

 

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))

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). o

 

Emerging growth company If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.     o

 

ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION

 

On March 28, 2019, Trans World Entertainment Corporation issued a press release announcing its financial results for its fiscal fourth quarter ended February 2, 2019.  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 March 28, 2019. 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 February 3, 2018.

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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 March 28, 2019.
   
99.2 Trans World Entertainment Corporation Transcript for Earnings Call held on March 28, 2019.

 

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:  March 29, 2019 /s/ Edwin Sapienza  
  Edwin Sapienza  
  Chief Financial Officer  
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EXHIBIT INDEX

 

Exhibit
No.		 Description
   
99.1 Trans World Entertainment Corporation Press Release dated March 28, 2019.
   
99.2 Trans World Entertainment Corporation Transcript for Earnings Call held on March 28, 2019.
4
 EX-99.1 2 c93341_ex99-1.htm

Exhibit 99.1

 

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

 

38 Corporate Circle

Albany, NY 12203

 

www.twec.com   NEWS RELEASE  

 

 

TRANS WORLD ENTERTAINMENT ANNOUNCES ANNUAL AND FOURTH QUARTER RESULTS

 

Albany, NY, March 28, 2019-- Trans World Entertainment Corporation (Nasdaq: TWMC) today announced results for the 13-week Fourth Quarter (“Fourth Quarter”) and 52-week year ended February 2, 2019 (“Fiscal 2018”), as compared to the 14-week Fourth Quarter (“Fourth Quarter 2017”) and 53-week year ended February 3, 2018 (“Fiscal 2017”). 

 

“For the fye segment, comparable store sales increased 2.8% with an improvement in gross margin. This marked the second consecutive quarter of positive comp sales. Our customers continue to respond positively to the changes in our merchandise assortment and presentation that were made to counter declining mall traffic and the ongoing declines in physical media,” commented Mike Feurer, Company CEO. “For etailz, in response to the decline in operating results, we’ve engaged outside support and initiated certain strategic changes to create operational efficiencies directed towards improving the etailz segment’s performance and cash flow. We remain confident in the underlying opportunity afforded by etailz as a top marketplace retailer and service provider,” concluded Mr. Feurer.

 

During the Fourth Quarter, etailz initiated cost savings steps to support operating model changes and a leaner organization that is better aligned with our future business focus. As part of such initiatives, an approximately 30% reduction in force was implemented during the Fourth Quarter, in addition to changes in senior management. Additional reductions included expenses related to technology and employee benefits. The annualized impact of these cost savings initiatives is expected to be approximately $4.5 million.

 

In addition, the Company has reduced its vendor portfolio in an effort to improve profitability, including rationalizing unprofitable vendors and renegotiating vendor terms to enhance gross margins and supply chain efficiencies.

 

As a result of the decline in operating results, the Company recorded a non-cash impairment charge on certain fixed assets, intangible assets, and goodwill of $59.7 million, including $57.7 million related to etailz.

 

Fourth Quarter Overview - Consolidated

 

·Total revenue for the Fourth Quarter decreased 12.4% to $127.4 million compared to $145.4 million for the Fourth Quarter of 2017.

 

·Net loss was $65.2 million, or $1.80 per diluted share, compared to a net loss of $32.5 million, or $0.90 per diluted share for Fourth Quarter 2017. Included in the Fourth Quarter and Fourth Quarter 2017 operating results were non-cash charges due to impairment of certain fixed assets, intangible assets, and goodwill in the amount of $59.7 million and $29.1 million, respectively.

 

·Loss from operations was $65.0 million compared to a loss from operations of $32.7 million for the fourteen weeks ended February 3, 2018.

 

·Adjusted EBITDA (a non-GAAP measure) was a loss of $2.3 million compared to $0.8 million for the Fourth Quarter of Fiscal 2017 (see note 1).

 

·Cash and cash equivalents as of February 2, 2019 was $4.4 million compared to $31.3 million at February 3, 2018.

 

·As of February 2, 2019 and February 3, 2018, the Company had no borrowings under its credit facility.

 

·Inventory was $95.3 million at the end of Fiscal 2018, versus $109.4 million at the end of Fiscal 2017. For the fye segment, inventory per square foot was $60 at the end of Fiscal 2018, consistent with the end of Fiscal 2017.

 

Fiscal 2018 Overview - Consolidated

 

·Total revenue decreased 5.6% to $418.2 million compared to $442.9 million in Fiscal 2017.

 

·Net loss was $96.9 million, or a loss of $2.67 per diluted share for Fiscal 2018 compared to a net loss of $42.6 million, or a loss of $1.18 per diluted share for Fiscal 2017. Included in the results for Fiscal 2018 and Fiscal 2017 were non-cash charges of $59.7 million and $29.1 million, respectively, as a result of recording impairment charges for certain fixed assets, intangible assets, and goodwill. In addition, Fiscal 2017 results included an $8.7 million gain on proceeds from company owned life insurance policies.

 

·Loss from operations was $96.3 million compared to a loss from operations of $51.4 million for Fiscal 2017.

 

·Adjusted EBITDA (a non-GAAP measure) was a loss of $23.8 million compared to $7.8 million for Fiscal 2017 (see note 1).
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Segment Highlights

 

   Thirteen and Fourteen
Weeks Ended (1)		   Fiscal Year Ended (2) 
(amounts in thousands)  February 2,
2019		   February 3,
2018		   February 2,
2019		   February 3,
2018		 
Total Revenue                    
fye  $78,817   $92,391   $231,290   $268,397 
etailz   48,612    53,018    186,900    174,459 
Total Company  $127,429   $145,409   $418,190   $442,856 
                     
Gross Profit                    
fye  $28,077   $30,912   $89,259   $104,254 
etailz   9,209    9,875    39,275    39,589 
Total Company  $37,286   $40,787   $128,534   $143,843 
                     
SG&A                    
fye  $27,929   $30,873   $107,141   $114,982 
etailz   11,608    11,498    45,144    38,462 
Total Company  $39,537   $42,371   $152,285   $153,444 
                     
Loss From Operations                    
fye  $(2,961)  $(31,551)  $(24,455)  $(49,261)
etailz   (62,085)   (1,174)   (71,891)   (2,140)
Total Company  $(65,046)  $(32,725)  $(96,346)  $(51,401)
                     
Reconciliation of fye Loss From Operations to fye Adjusted Loss From Operations 
fye Loss From Operations  $(2,961)  $(31,551)  $(24,455)  $(49,261)
Asset impairment charges   1,946    29,107    1,946    29,107 
fye Adjusted Loss From Operations  $(1,015)  $(2,444)  $(22,509)  $(20,154)
                     
Reconciliation of etailz Loss From Operations to etailz Adjusted Loss From Operations 
etailz Loss From Operations  $(62,085)  $(1,174)  $(71,891)  $(2,140)
Acquisition related amortization expense   974    966    3,890    3,871 
Acquisition related compensation expense, net of contingency benefit   831    (726)   3,821    982 
Asset impairment charges   57,712    -    57,712    - 
etailz Adjusted (Loss) Income From Operations  $(2,568)  $(934)  $(6,468)  $2,713 

 

(1)The fourth fiscal quarter ended February 2, 2019 contains 13 weeks.
The fourth fiscal quarter ended February 3, 2018 contains 14 weeks.
  
(2)The fiscal year ended February 2, 2019 contains 52 weeks.
The fiscal year ended February 3, 2018 contains 53 weeks.

 

Fourth Quarter Overview - etailz

 

·Revenue for the Fourth Quarter was $48.6 million, an 8.3% decrease as compared to the Fourth Quarter of 2017. etailz revenue contributed 38.1% of total consolidated revenue during the quarter as compared to 36.5% for the same period last year.

 

·Gross profit for the Fourth Quarter was $9.2 million, or 18.9% of revenue as compared to $9.9 million or 18.6% of revenue for the same period last year.
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·Selling, general and administrative (“SG&A”) expenses for the Fourth Quarter were $11.6 million, or 23.9% of revenue, compared to $11.5 million, or 21.7% of revenue, for the same period last year.

 

·etailz loss from operations was $62.1 million for the Fourth Quarter versus $1.2 million for the same period last year. Included in the Fourth Quarter operating results were non-cash charges due to impairment of certain fixed assets, intangible assets, and goodwill, in the amount of $57.7 million.

 

·etailz adjusted loss from operations (a non-GAAP measure) was $2.6 million for the Fourth Quarter as compared to $0.9 million for the Fourth Quarter 2017 (see note 1).

 

Fiscal 2018 Overview – etailz

 

·Revenue for Fiscal 2018 was $186.9 million as compared to $174.5 million for the Fiscal 2017, an increase of 7.1%. etailz revenue contributed 44.7% of total consolidated revenue during Fiscal 2018 versus 39.4% during Fiscal 2017.

 

·Gross profit for Fiscal 2018 was $39.3 million, or 21.0% of revenue as compared to $39.6 million, or 22.7% of revenue, for Fiscal 2017.

 

·SG&A expenses for Fiscal 2018 were $45.1 million, or 24.2% of revenue compared to $38.5 million, or 22.0% of revenue, for Fiscal 2017.

 

·Loss from operations was $71.9 million compared to $2.1 million last year. Included in Fiscal 2018 operating results were non-cash charges due to impairment of certain long-lived assets in the amounts of $57.7 million. etailz adjusted income from operations (a non-GAAP measure) was a loss of $6.5 million for Fiscal 2018 compared to income of $2.7 million for Fiscal 2017 (see note 1).

 

Fourth Quarter Overview – fye

 

·Total revenue for the Fourth Quarter declined 14.7% to $78.8 million for the fye segment. Comparable store sales improved 2.8% compared to the same quarter last year.

 

·Gross profit was $28.1 million compared to $30.9 million, for the same period last year. On a rate basis, gross profit was 35.6% of revenue compared to 33.5% of revenue, for the same quarter last year. An increase in gross profit was due to fewer markdowns compared to Fiscal 2017.

 

·SG&A expenses decreased $2.9 million, or 9.5%, for the Fourth Quarter to $27.9 million, or 35.4% of revenue, compared to $30.9 million, or 33.4% of revenue, for the same period last year. The decline in SG&A expenses was due to lower expenses as a result of fewer stores in operation.
4
·The fye segment recorded a loss from operations of $3.0 million as compared to $31.6 million for the Fourth Quarter of 2017. Included in Fourth Quarter and Fourth Quarter 2017 operating results were non-cash charges due to impairment of certain fixed assets in the amounts of $1.9 million and $29.1 million, respectively.

 

·fye adjusted loss from operations (a non-GAAP measure) was $1.0 million for the Fourth Quarter compared to $2.4 million for the same period last year (see note 1).

 

Fiscal 2018 Overview – fye

 

·Total revenue declined $37.1 million or 13.8%, for the fye segment. Comparable store sales for the fiscal year declined 2.0% compared to the same period last year. The Company ended Fiscal 2018 with 210 stores in operation as compared to 260 at the end of Fiscal 2017.

 

·Gross profit for Fiscal 2018 was $89.3 million, or 38.6% of revenue, compared to $104.3 million, or 38.8% of revenue, for Fiscal 2017.

 

·Selling, general and administrative (“SG&A”) expenses decreased $7.8 million, or 6.8%, for Fiscal 2018 to $107.1 million, or 46.3% of revenue, compared to $115.0 million, or 42.8% of revenue, for the same period last year. The decline in SG&A expenses was due to lower expenses as a result of fewer stores in operation.

 

·The fye segment recorded a loss from operations of $24.5 million for Fiscal 2018 as compared to a loss from operations of $49.3 million for Fiscal 2017. Included in Fiscal 2018 and Fiscal 2017 results are non-cash charges of $1.9 million and $29.1 million, respectively, as a result of recording impairment against certain fixed assets. In addition, Fiscal 2017 results included an $8.7 million gain on proceeds from company owned life insurance policies.

 

·fye adjusted loss from operations (a non-GAAP measure) was $22.5 million for Fiscal 2018 as compared to $20.2 million loss for Fiscal 2017 (see note 1).

 

Trans World will host a teleconference call today, Thursday, March 28, 2019, 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.

5

CONSOLIDATED STATEMENTS OF OPERATIONS:

(in thousands, except per share data)

 

   Thirteen and Fourteen Weeks Ended (1)  Fiscal Year Ended (2)
   February 2,  % to  February 3,  % to  February 2,  % to  February 3,  % to
   2019  Revenue  2018  Revenue  2019  Revenue  2018  Revenue
                         
Net sales  $125,849        $143,690        $412,997        $437,173      
Other revenue   1,580         1,719         5,193         5,683      
Total revenue  $127,429        $145,409        $418,190        $442,856      
                                         
Cost of sales   90,143    70.7%   104,622    72.0%   289,656    69.3%   299,013    67.5%
Gross profit   37,286    29.3%   40,787    28.0%   128,534    30.7%   143,843    32.5%
                                         
Selling, general and administrative expenses   39,537    31.0%   42,371    29.1%   152,285    36.4%   153,446    34.6%
Income from joint venture   -    0.0%   (749)   -0.5%   -    0.0%   (1,787)   -0.4%
Acquisition related compensation expense (benefit), net of contingency benefit   831    0.7%   (726)   -0.5%   3,821    0.9%   982    0.2%
Asset impairment charges   59,658    46.8%   29,107    20.0%   59,658    14.3%   29,107    6.6%
Depreciation and amortization expenses   2,306    1.8%   3,509    2.4%   9,116    2.2%   13,496    3.0%
Loss from operations   (65,046)   -51.0%   (32,725)   -22.5%   (96,346)   -23.0%   (51,401)   -11.6%
                                         
Interest expense   279    0.2%   132    0.1%   723    0.2%   332    0.1%
Gain on insurance proceeds   -         -    0.0%   -    0.0%   (8,733)   -2.0%
Other income   (56)   0.0%   (57)   0.0%   (227)   -0.1%   (148)   0.0%
                                         
Loss before income taxes   (65,269)   -51.2%   (32,800)   -22.6%   (96,842)   -23.2%   (42,852)   -9.7%
Income tax expense (benefit)   (56)   0.0%   (332)   -0.2%   80    0.0%   (299)   -0.1%
                                         
Net loss  $(65,213)   -51.2%  $(32,468)   -22.3%  $(96,922)   -23.2%  $(42,553)   -9.6%
                                         
Basic and diluted loss per common share:                                        
                                         
Basic and diluted loss per share  $(1.80)       $(0.90)       $(2.67)       $(1.18)     
                                         
Weighted average number of common shares outstanding - basic and diluted   36,322         36,212         36,286         36,191      
                                         
SELECTED BALANCE SHEET CAPTIONS:                      February 2,       February 3,     
(in thousands, except store data)                      2019       2018     
                                         
Cash and cash equivalents                      $4,355        $31,326      
Merchandise inventory                       95,302         109,377      
Fixed assets (net)                       6,684         13,546      
Accounts payable                       34,329         41,780      
Borrowings under line of credit                       -         -      
                                         
Stores in operation, end of period                       210         260      

 

(1)The fourth fiscal quarter ended February 2, 2019 contains 13 weeks.
The fourth fiscal quarter ended February 3, 2018 contains 14 weeks.
  
(2)The fiscal year ended February 2, 2019 contains 52 weeks.
The fiscal year ended February 3, 2018 contains 53 weeks.

 

Notes:

 

1.         Reconciliation of net loss to adjusted EBITDA:

 

Adjusted EBITDA is defined as net loss, adjusted to exclude: (i) income tax expense (benefit); (ii) other income, including gain from insurance proceeds; (iii) interest expense; (iv) depreciation expense; (v) asset impairment charges; (vi) acquisition related amortization expenses; (vii) and acquisition related compensation expense (benefit), which includes retention bonuses, restricted stock, and contingency 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.

6

 

(amouints in thousands)            
   Thirteen and  Fourteen Weeks
Ended (1)		  Fiscal Year Ended (2)
   February 2,  February 3,  February 2,  February 3,
   2019  2018  2019  2018
                     
Net loss  $(65,213)  $(32,468)  $(96,922)  $(42,553)
Income tax expense (benefit)   (56)   (332)   80    (299)
Other income   (56)   (57)   (227)   (8,881)
Interest expense   279    132    723    332 
Loss from Operations   (65,046)   (32,725)   (96,346)   (51,401)
Depreciation expense   1,332    2,543    5,226    9,627 
Asset impairment charges   59,658    29,107    59,658    29,107 
Acquisition related amortization expenses   974    966    3,890    3,871 
Acquisition related compensation expense (benefit), net of contingency adjustment   831    (726)   3,821    982 
Adjusted EBITDA  $(2,251)  $(835)  $(23,751)  $(7,814)

 

(1)The fourth fiscal quarter ended February 2, 2019 contains 13 weeks.
The fourth fiscal quarter ended February 3, 2018 contains 14 weeks.
  
(2)The fiscal year ended February 2, 2019 contains 52 weeks.
The fiscal year ended February 3, 2018 contains 53 weeks.

 

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.

7
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Exhibit 99.2

 

TRANS WORLD ENTERTAINMENT CORPORATION

 

4th QUARTER AND ANNUAL CONFERENCE CALL

 

THURSDAY, MARCH 28, 2019

 

Time: 10:00 AM

   
Operator: __________________ Phone: __________________
Instructions: _____________  
   

 

Mike Feurer - Introduction of the Call

 

·Good Morning. Thank you for joining us as we discuss our fourth quarter and annual results.

 

·On the call with me today is Ed Sapienza, our Chief Financial Officer.

 

·For the fye segment, comparable store sales increased 2.8% with a 210 basis point improvement in gross margin. This marked the second consecutive quarter of positive comp sales. Our customers continue to respond positively to the changes in our merchandise assortment and presentation that were made to counter declining mall traffic and the ongoing declines in physical media.

 

·For etailz, in response to the decline in operating results, we’ve engaged outside support and initiated certain strategic initiatives to create operational efficiencies directed towards improving the etailz segment’s performance and cash flow. We remain confident in the underlying opportunity afforded by etailz as a top
 

marketplace retailer and service provider.

 

·During the fourth quarter, etailz initiated cost savings steps to support operating model changes and a leaner organization that is aligned with our future business focus. As part of such initiatives, an approximately 30% reduction in force was implemented during the fourth quarter. The annualized impact of our cost savings initiatives is expected to be approximately $4.5 million.

 

·In addition, the Company has rationalized its vendor portfolio in an effort to improve profitability, including rationalizing unprofitable vendors and renegotiating vendor terms to enhance gross margins and supply chain efficiencies.

 

·Now Ed will take you through financial results for the fourth quarter and fiscal year.

 

ES - Review of Annual and 4th Quarter Results

 

·Thanks Mike. Good Morning everyone.

 

·Consolidated revenue for the quarter was $127 million dollars, versus $145 million dollars last year, a 12% decline.

 

·Comparable sales for the fye segment improved 2.8% compared to the same period last year.

 

·In our Lifestyle categories, comp sales increased 6.5% for the quarter. These categories represented 44% of fye segment sales for
-2-
 

the quarter compared to 41% last year.

 

·Electronics comp sales increased 8.4%. Electronics represented 17% of fye segment sales, compared to 16% last year.

 

·Media categories comp sales declined 2.4% for the quarter and represented 39% of fye segment sales compared to 43% last year. Music sales increased 2% and video sales were down 5%.

 

·In the etailz segment, revenue for the fourth quarter was $49 million dollars, a decline of 8% as we initiated our vendor rationalization. etailz revenue contributed 38.1% of total consolidated revenue during the quarter as compared to 36.5% for the same period last year.

 

·Consolidated gross profit for the quarter was $37.3 million dollars or 29.3% compared to $40.8 million dollars or 28.0% last year, an improvement of 130 basis points.

 

·In the fye segment, the gross margin rate was 35.6% compared to 33.5% last year, an improvement of 210 basis points.

 

·In the etailz segment, gross profit for the fourth quarter was $9.2 million dollars, or 18.9% of revenue versus $9.9 million dollars or 18.6% last year.

 

·Consolidated SG&A expenses for the quarter were $39.5 million dollars or 31% of revenue compared to $42.4 million dollars or
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29.1% last year.

 

·In the fye segment, SG&A expenses decreased $3.0 million dollars or 9.5% to $27.9 million dollars compared to $30.9 million dollars last year. On a rate basis SG&A expenses in the fye segment were 35.4% of revenue compared to 33.4% last year. The decline in SG&A expenses was due to lower expenses from fewer stores in operation.

 

·In the etailz segment, SG&A expenses for the fourth quarter were $11.6 million dollars, or 23.9% of revenue, compared to $11.5 million dollars, or 21.7% of revenue for the same period last year.

 

·Driven by non-cash charges of $59.7 million from recording impairments against certain fixed assets, intangible assets, and goodwill, the Consolidated operating loss for the quarter was $65 million dollars compared to an operating loss of $32.7 million dollars last year, which included impairment charges of $29.1 million.

 

·fye adjusted loss from operations was $1 million dollars compared to an adjusted operating loss of $2.4 million dollars last year.

 

·etailz adjusted loss from operations was $2.6 million dollars for the fourth quarter as compared to a loss of $934 thousand dollars last year.

 

·For the fourth quarter, our consolidated net loss was $65.2 million
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dollars or $1.80 per diluted share as compared to net loss of $32.5 million dollars or $0.90 per diluted share last year.

 

·Consolidated adjusted EBITDA for the fourth quarter was a loss of $2.3 million dollars, as compared to a loss of $835 thousand dollars last year.

 

·Now let me touch on our annual results.

 

·Fiscal 2018 consolidated revenue was $418 million dollars, compared to $443 million dollars for the same period last year.

 

·Consolidated net loss, was $96.9 million dollars, or $2.67 per diluted share compared to net loss of $42.6 million dollars, or $1.18 per diluted share for the same period last year.

 

·Consolidated adjusted EBITDA was a loss of $23.8 million dollars compared to a loss of $7.8 million dollars last year.

 

·Cash and cash equivalents at the end of fiscal 2018 were $4.4 million, compared to $31.3 million dollars last year.

 

·As of February 2, 2019, we did not have borrowings under our credit facility.

 

·Inventory was $95.3 million dollars versus $109.4 million dollars last year. In the fye segment, inventory per square foot was $60, same level as last year.

 

·We ended the year with 210 stores and 1.2 million square feet in
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operation versus last year’s 260 stores and 1.4 million square feet.

 

·Now I’ll turn it back over to Mike.

 

Closing – Mike Feurer

 

·Thanks Ed.

 

·In the fye segment, unique merchandise and experiences associated with the tremendous amount of entertainment and pop culture content being created is our opportunity. Efforts to change our merchandise point of view based on unique, relevant, collaborative and exclusive merchandise have been well received by our customer and will drive the continued reinvention of the fye brand throughout 2019.

 

·For etailz, our recent initiatives and long-term strategic plan are focused on strengthening the core business and improving profitability, which will be used to fund growth initiatives and innovation for the future.

 

·This concludes our call. I would like to thank you for your time today and we look forward to talking to you about our first quarter results in June.
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