“In the etailz segment, we saw the benefits of the performance improvement initiatives implemented in the Fourth Quarter of 2018, highlighted by improved gross margins, lower SG&A expenses and improved supply chain efficiency. This serves as a great foundation for our new etailz CEO,
Second QuarterOverview – Consolidated
- Total revenue decreased 25.6% to
$76.0 million compared to$102.2 million in the second quarter of fiscal 2018. - Net loss was
$8.1 million , or$4.48 per share, for the 13 weeks endedAugust 3, 2019 , compared to a net loss of$9.5 million , or$5.23 per share, for the same period last year (see note 1). - Loss from operations was
$7.4 million compared to an operating loss of$9.4 million for the second quarter of fiscal 2018. - Adjusted EBITDA (a non-GAAP measure) was a loss of
$6.4 million compared to a loss of$6.0 million for the second quarter of fiscal 2018 (see note 2).
Twenty-six weeks ended August 3, 2019 Overview – Consolidated
- Total revenue for the twenty-six weeks ended
August 3, 2019 decreased 21.4% to$156.2 million , compared to$198.8 million for the same period last year. - Net loss was
$15.9 million , or$8.77 per share, for the twenty-six weeks endedAugust 3, 2019 , compared to a net loss of$17.7 million , or$9.73 per share, for the same period last year (see note 1). - Loss from operations was
$15.0 million compared to an operating loss of$17.5 million for the twenty-six weeks endedAugust 4, 2018 . - Adjusted EBITDA (a non-GAAP measure) was a loss of
$12.9 million compared to a loss of$10.8 million for the second quarter of fiscal 2018 (see note 2). - Cash used in operations during the first twenty–six weeks of fiscal 2019 was
$15.0 million compared to$32.9 million for the same period last year. - Cash, cash equivalents and restricted cash as of
August 3, 2019 was$9.9 million , compared to$14.7 million as ofAugust 4 , 2018. - Borrowings under the credit facility at the end of the second quarter were
$12.1 million compared to$6.3 million at the end of the second quarter last year. As ofAugust 3, 2019 ,$16.1 million was available for borrowing. - Inventory was
$89.8 million at the end of second quarter of 2019 as compared to $114.9 million at the end of the second quarter of 2018.
Segment Highlights
| Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||
| (amounts in thousands) | August 3, 2019 |
August 4, 2018 |
August 3, 2019 |
August 4, 2018 |
|||||||||
| Total Revenue | |||||||||||||
| fye | $ | 41,744 | $ | 50,545 | $ | 86,762 | $ | 104,608 | |||||
| etailz | 34,260 | 51,629 | 69,392 | 94,169 | |||||||||
| Total Company | $ | 76,004 | $ | 102,174 | $ | 156,154 | $ | 198,777 | |||||
| Gross Profit | |||||||||||||
| fye | $ | 17,013 | $ | 20,634 | $ | 34,515 | $ | 42,905 | |||||
| etailz | 8,103 | 11,539 | 15,991 | 20,956 | |||||||||
| Total Company | $ | 25,116 | $ | 32,173 | $ | 50,506 | $ | 63,861 | |||||
| SG&A | |||||||||||||
| fye | $ | 23,052 | $ | 26,103 | $ | 46,082 | $ | 52,592 | |||||
| etailz | 8,413 | 12,067 | 17,368 | 22,070 | |||||||||
| Total Company | $ | 31,465 | $ | 38,170 | $ | 63,450 | $ | 74,662 | |||||
| Loss From Operations | |||||||||||||
| fye | $ | (6,655 | ) | $ | (6,629 | ) | $ | (12,755 | ) | $ | (12,001 | ) | |
| etailz | (746 | ) | (2,760 | ) | (2,287 | ) | (5,547 | ) | |||||
| Total Company | $ | (7,401 | ) | $ | (9,389 | ) | $ | (15,042 | ) | $ | (17,548 | ) | |
| Reconciliation of etailz Loss from Operations to etailz Adjusted Loss From Operations | |||||||||||||
| etailz loss from operations | $ | (746 | ) | $ | (2,760 | ) | $ | (2,287 | ) | $ | (5,547 | ) | |
| Acquisition related amortization expense | 286 | 972 | 572 | 1,944 | |||||||||
| Acquisition related compensation expense, net of contingency benefit | – | 1,118 | 66 | 2,240 | |||||||||
| etailz adjusted loss from operations | $ | (460 | ) | $ | (670 | ) | $ | (1,649 | ) | $ | (1,363 | ) | |
Second Quarter Overview – etailz
- Revenue for the second quarter was
$34.3 million , compared to$51.6 million for the same period last year. The decline in revenue was due to the vendor rationalization and remediation initiative. Rationalization and remediation activities included terminating unprofitable vendors and improving vendor relationships through negotiations focused on improvements to gross margins and supply chain efficiencies. - Gross profit for the second quarter was
$8.1 million , or 23.7% of revenue, as compared to$11.5 million , or 22.3% of revenue, for the same period last year. - Selling, general and administrative (“SG&A”) expenses for the second quarter were
$8.4 million , or 24.6% of revenue, compared to$12.1 million , or 23.4% of revenue, for the same period last year. The decline in SG&A expenses was due to expense reduction initiatives implemented in the fourth quarter of fiscal 2018. - etailz loss from operations was
$0.8 million for the second quarter versus$2 .8 million for the same period last year. - etailz adjusted loss from operations (a non-GAAP measure) was
$0.5 million for the second quarter of fiscal 2019 compared to$0.7 million for the second quarter of fiscal 2018 (see note 2).
Twenty-six weeks ended August 3, 2019 Overview – etailz
- Revenue for the twenty-six weeks ended
August 3, 2019 was$69.4 million compared to$94.2 million for the same period last year. Gross profit for the twenty-six weeks endedAugust 3, 2019 was$16.0 million , or 23.0% of revenue, compared to$21.0 million , or 22.3% of revenue, for the same period last year. - SG&A expenses for the twenty-six weeks ended
August 3, 2019 were$17.4 million , or 25.0% of revenue, compared to$22.1 million , or 23.4% of revenue, for the same period last year. - etailz adjusted loss from operations (a non-GAAP measure) was
$1.6 million for the first half of fiscal 2019 compared to a loss of$1.4 million for the same period last year (see note 2).
Second Quarter Overview – fye
- For the quarter ended
August 3, 2019 , revenue decreased 17.4% to$41.7 million , compared to$50.5 million for the same period last year. Comparable store sales were down 1.2% compared to the same quarter last year, as a comparable store sales increase of 9.6% in the lifestyle category offset declines in the media categories. The lifestyle and electronics categories represented 60.3% of revenue for the quarter as compared to 53.9% for the same period last year. - Gross profit for the second quarter was
$17.0 million , or 40.8% of revenue, compared to$20.6 million , or 40.8% of revenue, for the same period last year. - SG&A expenses decreased
$3.1 million , or 11.7%, for the second quarter to$23.1 million , or 55.2% of fye revenue, compared to$26.1 million , or 51.6% 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 expenses as a percentage of revenue was due to an increase in outside consulting and professional fees. - The fye segment recorded an operating loss of
$6.7 million for the 13 weeks endedAugust 3, 2019 , compared to an operating loss of$6.6 million for same period last year. - As of
August 3, 2019 , fye segment inventory was$61 per square foot as compared to$62 per square foot as ofAugust 4, 2018 .
Twenty-six weeks ended August 3, 2019 Overview – fye
- For the twenty-six weeks ended
August 3, 2019 , revenue decreased 17.1% to$86.8 million , compared to$104.6 million for the same period last year. - Gross profit for the twenty-six weeks ended
August 3, 2019 was$34.5 million , or 39.8% of revenue, compared to$42.9 million , or 41.0% of revenue, for the same period last year. - For the twenty-six weeks ended
August 3, 2019 , SG&A expenses decreased$6.5 million , or 12.4%, to$46.1 million compared to$52.6 million in the comparable period last year. As a percentage of revenue, SG&A expenses were 53.1% versus 50.3% for the same period last year. The decline in SG&A expenses was due to fewer stores in operation. - The fye segment recorded an operating loss of
$12.8 million for the twenty-six weeks endedAugust 3, 2019 , compared to an operating loss of$12.0 million for same period last year.
Trans World will host a teleconference call
Condensed Consolidated Financial Results
STATEMENTS OF OPERATIONS:
(in thousands, except per share data)
| Thirteen Weeks Ended | Twenty-six Weeks Ended | |||||||||||||||||||||
| August 3, | % to | August 4, | % to | August 3, | % to | August 4, | % to | |||||||||||||||
| 2019 | Revenue | 2018 | Revenue | 2019 | Revenue | 2018 | Revenue | |||||||||||||||
| Net sales | $ | 75,152 | $ | 101,039 | $ | 154,508 | $ | 196,271 | ||||||||||||||
| Other revenue | 852 | 1,135 | 1,646 | 2,506 | ||||||||||||||||||
| Total revenue | $ | 76,004 | $ | 102,174 | $ | 156,154 | $ | 198,777 | ||||||||||||||
| Cost of sales | 50,888 | 67.0 | % | 70,001 | 68.5 | % | 105,648 | 67.7 | % | 134,916 | 67.9 | % | ||||||||||
| Gross profit | 25,116 | 33.0 | % | 32,173 | 31.5 | % | 50,506 | 32.3 | % | 63,861 | 32.1 | % | ||||||||||
| Selling, general and administrative expenses | 31,465 | 41.4 | % | 38,170 | 37.4 | % | 63,450 | 40.6 | % | 74,662 | 37.6 | % | ||||||||||
| Acquisition related compensation expenses | – | 0.0 | % | 1,118 | 1.1 | % | 66 | 0.0 | % | 2,240 | 1.1 | % | ||||||||||
| Depreciation and amortization expenses | 1,052 | 1.3 | % | 2,274 | 2.2 | % | 2,032 | 1.3 | % | 4,507 | 2.3 | % | ||||||||||
| Loss from operations | (7,401 | ) | -9.7 | % | (9,389 | ) | -9.2 | % | (15,042 | ) | -9.6 | % | (17,548 | ) | -8.8 | % | ||||||
| Interest expense | 194 | 0.3 | % | 103 | 0.1 | % | 326 | 0.2 | % | 166 | 0.1 | % | ||||||||||
| Other loss (income) | 462 | 0.6 | % | (49 | ) | 0.0 | % | 419 | 0.3 | % | (128 | ) | -0.1 | % | ||||||||
| Loss before income taxes | (8,057 | ) | -10.6 | % | (9,443 | ) | -9.2 | % | (15,787 | ) | -10.1 | % | (17,586 | ) | -8.8 | % | ||||||
| Income tax expense | 71 | 0.1 | % | 67 | 0.1 | % | 143 | 0.1 | % | 71 | 0.0 | % | ||||||||||
| Net loss | $ | (8,128 | ) | -10.7 | % | $ | (9,510 | ) | -9.3 | % | $ | (15,930 | ) | -10.2 | % | $ | (17,657 | ) | -8.9 | % | ||
| Basic and diluted loss per common share: | ||||||||||||||||||||||
| Basic and diluted loss per share | $ | (4.48 | ) | $ | (5.23 | ) | $ | (8.77 | ) | $ | (9.73 | ) | ||||||||||
| Weighted average number of common shares outstanding – basic and diluted | 1,816 | 1,818 | 1,816 | 1,815 | ||||||||||||||||||
| Diluted Income per common share: | ||||||||||||||||||||||
| SELECTED BALANCE SHEET CAPTIONS: | August 3, | August 4, | ||||||||||||||||||||
| (in thousands, except store data) | 2019 | 2018 | ||||||||||||||||||||
| Cash, cash equivalents, and restricted cash | $ | 9,930 | $ | 14,740 | ||||||||||||||||||
| Merchandise inventory | 89,785 | 114,920 | ||||||||||||||||||||
| Fixed assets (net) | 7,605 | 12,648 | ||||||||||||||||||||
| Accounts payable | 29,065 | 34,200 | ||||||||||||||||||||
| Borrowings under line of credit | 12,086 | 6,341 | ||||||||||||||||||||
| Cash used in operations | 14,962 | 32,944 | ||||||||||||||||||||
| Stores in operation, end of period | 206 | 241 | ||||||||||||||||||||
Notes:
- Reverse Stock Split:
As previously reported, effective
August 15 th, 2019, the Company effected a 1-20 reverse stock split of its common stock. All share and earnings per share information have been retroactively adjusted to reflect this reverse stock split.
- Reconciliation of net loss to adjusted EBITDA:
Adjusted EBITDA is defined as net loss, adjusted to exclude: (i) income tax expense; (ii) other (loss) income, which includes the write-down of an investment; (iii) interest expense; (iv) depreciation expense; (v) acquisition related amortization expense; and (vi) acquisition related compensation expense, which includes 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. 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.
| Thirteen Weeks Ended | Twenty-six Weeks Ended | ||||||||||||
| August 3, | August 4, | August 3, | August 4, | ||||||||||
| (amounts in thousands) | 2019 | 2018 | 2019 | 2018 | |||||||||
| Net loss | $ | (8,128 | ) | $ | (9,510 | ) | $ | (15,930 | ) | $ | (17,657 | ) | |
| Income tax expense | 71 | 67 | 143 | 71 | |||||||||
| Other loss (income) | 462 | (49 | ) | 419 | (128 | ) | |||||||
| Interest expense | 194 | 103 | 326 | 166 | |||||||||
| Operating loss | (7,401 | ) | (9,389 | ) | (15,042 | ) | (17,548 | ) | |||||
| Depreciation expense | 766 | 1,302 | 1,460 | 2,563 | |||||||||
| Acquisition related amortization expense | 286 | 972 | 572 | 1,944 | |||||||||
| Acquisition related compensation expense, net of contingency adjustment | – | 1,118 | 66 | 2,240 | |||||||||
| Adjusted EBITDA | $ | (6,349 | ) | $ | (5,997 | ) | $ | (12,944 | ) | $ | (10,801 | ) | |
The Company believes that 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
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
| Contact: Trans World Entertainment Ed Sapienza Chief Financial Officer (518) 452-1242 |
Contact: Financial Relations Board Marilynn Meek () (212) 827-3773 |
|
Source: Trans World Entertainment Corp.