“Driven by the acquisition of etailz, total revenue for the quarter increased 35%. The increase in revenue highlights the digital diversification of the Company. We continue to focus on the growth potential of the primary etailz enterprise, the reinvention and stabilization of the fye brand, and the synergies afforded by the combination of the two,” commented
First Quarter Overview – Consolidated
October 2016, the Company acquired etailz, Inc., a leading digital marketplace retailer. Results for etailz are included in the consolidated results for the first quarter of fiscal 2017.
- Total revenue increased 35% to
$102.0 millioncompared to $75.7 millionin the first quarter of fiscal 2016, as $37.0 millionin revenue from etailz more than offset a $10.8 milliondecline in fye revenue.
- Net income was
$3.5 million, or $0.10per diluted share, for the 13 weeks ended April 29, 2017, compared to $27 thousand, or $0.00per diluted share for same period last year. During the quarter, the Company recorded an $8.8 milliongain on insurance proceeds for corporate owned life insurance policies on the former Chairman.
- Operating loss was
$5.2 millioncompared to operating loss of $0.7 millionfor the first quarter of fiscal 2016, as income from etailz was more than offset by losses in the fye segment and $1.9 millionin acquisition related amortization and compensation expense recorded in the first quarter.
- Adjusted EBITDA (a non-GAAP measure) was a loss of
$1.1 millioncompared to income of $0.8 millionfor the first quarter of fiscal 2016 (see note 1).
- Cash and cash equivalents as of
April 29, 2017was $15.8 million, compared to $90.9 millionat April 30, 2016. The primary uses of cash were related to the acquisition of etailz and investments in new and remodeled stores opened in fiscal 2016.
|TRANS WORLD ENTERTAINMENT CORPORATION|
April 29, 2017
April 30, 2016
|Loss From Operations|
|Reconciliation of etailz Loss from Operations to etailz Adjusted Income From Operations (2)|
|etailz Loss From Operations||$||(821||)||$||–|
|Acquisition related amortization and compensation expense||1,880||–|
|etailz Adjusted Income From Operations||$||1,059||$||–|
First Quarter Overview – fye
- The fye segment recorded an operating loss of
$4.4 millionfor the 13 weeks ended April 29, 2017, compared to a loss of $0.7 millionfor same period last year.
- Total revenue declined 14.2% for the fye segment. Comparable store sales declined 9.4% compared to the same quarter last year, as a comp increase of 10% in lifestyle categories was offset by a 19% decline in heritage media categories. Lifestyle categories represented 32% of revenues for first quarter as compared to 26% in the same period last year.
- Gross profit for the first quarter was
$26.9 million, or 41.4% of revenue, compared to $30.8 million, or 40.7% of revenue, for the same period last year. The increase in gross margin as a percentage of revenue was due to better costing and price management.
- Selling, general and administrative (“SG&A”) expenses decreased
$1.0 million, or 3.2%, for the first quarter to $29.1 million, or 44.8% of revenue, compared to $30.0 million, or 39.7% 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 comp sales decline and expenses to support the upgrading of the Company’s digital foundation, including the re-platforming of fye.com.
Mr. Feurer added, “We again experienced double digit growth in our lifestyle categories. Our fye stores continue to offer a unique platform for media, entertainment and pop culture for our customers, brands and partners. However, we were impacted by the well-publicized negative mall traffic trends and the continued expected disruption in our heritage physical media categories. I expect these headwinds in the mall environment to persist to some degree. Further, we were impacted by the delay of federal tax refund checks in the month of February, which was down 19%. March and April saw improved trends in both traffic and sales.”
First Quarter Overview – etailz
- Comparisons to the prior year for the etailz segment represent the unconsolidated performance of etailz for the first quarter of 2016.
- etailz Adjusted Income from Operations was $1.1 million for the first quarter, a 16% increase as compared to the first quarter of 2016.
- Total revenue for the first quarter was
$37.0 million, a 39% increase as compared to the first quarter of 2016. etailz revenue contributed 36% of total revenue during the quarter.
- Total gross profit for the first quarter was
$9.4 million, or 25.4% of sales.
- Total SG&A expenses for the first quarter were
$8.3 million, or 22.7% of sales.
|TRANS WORLD ENTERTAINMENT CORPORATION|
|Condensed Consolidated Financial Results|
|STATEMENTS OF OPERATIONS:|
|(in thousands, except per share data)|
|Fiscal Quarter Ended|
|April 29,||% to||April 30,||% to|
|Cost of sales||65,662||64.4||%||44,904||59.3||%|
|Selling, general and|
|Depreciation and amortization||3,223||3.2||%||1,463||1.9||%|
|Loss from operations||(5,207||)||-5.1||%||(685||)||-0.9||%|
|Income before income taxes||3,587||3.5||%||74||0.1||%|
|Income tax expense||54||0.1||%||47||0.1||%|
|Basic income per common share||$||0.10||$||0.00|
|Weighted average number of|
|common shares outstanding – basic||36,177||30,761|
|Diluted income per share||$||0.10||$||0.00|
|Weighted average number of|
|common shares outstanding – diluted||36,214||30,930|
|SELECTED BALANCE SHEET CAPTIONS:||April 29,||April 30,|
|(in thousands, except store data)||2017||2016|
|Cash and cash equivalents||$||15,803||$||90,856|
|Fixed assets (net)||44,787||33,198|
|Borrowings under line of credit||–||–|
|Stores in operation, end of period||273||290|
1. Reconciliation of net income to adjusted EBITDA:
Adjusted EBITDA is defined as net income, adjusted to exclude: (i) income tax; (ii) other expense (income), including gain on sale of investments and gain from insurance proceeds; (iii) interest expense; (iv) depreciation and amortization; (v) acquisition related compensation expenses including retention bonuses and restricted stock. 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 income to adjusted EBITDA appears below.
|Thirteen Weeks Ended|
|April 29,||April 30,|
|Income tax expense||54||47|
|Depreciation and amortization||3,223||1,463|
|Acquisition related compensation expenses*||909||–|
|* – Net of amortization of intangible assets included in depreciation and amortization.|
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
2. 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.
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
Trans World Entertainment John AndersonChief Financial Officer (518) 452-1242 Contact: Financial Relations Board Marilynn Meek() (212) 827-3773