Trans World Completes Restructuring, Buys Music Chain

Most of the stores closed were f.y.e. locations, many with expiring leases, Sullivan said. Trans World has 380 leases that come for renewal this year and will “capitalize on the real estate environment to maximize the productivity of our locations,” CEO Robert Higgins told analysts in a conference call. Along those lines, Trans World purchased bankrupt Value City Music this year for $1.8 million, adding five stores. They are Spin Street stores in the Mohegan Sun Casino in Uncasville, Conn., and Memphis, Tenn., Record Trader in Towson, Md., and Manifest in Charlotte, N.C., and Columbia, S.C., Sullivan said. The stores will keep their names, he said. Trans World posted a $330,000 gain on the acquisition, he said.

Trans World had retrenched rapidly amid declining CD sales and the shift toward music downloads. It peaked at nearly 1,000 stores but closed 101 in fiscal 2008. Most of its stores operate under the f.y.e. banner, including 396 mall-based and 108 freestanding stores, Sullivan said. It has 33 Suncoast Motion Picture Co. and seven Saturday Matinee stores and a handful that operate as Second Spin, Sullivan said.

In the face of a 46 percent decline in Q4 videogame console sales, Trans World has dropped the category from 124 f.y.e. locations, Sullivan said. The chain will keep videogames in 100 locations where they have been profitable, he said. Q4 videogame software sales fell 8 percent and the category posted an 17 percent overall decline. A year ago, Trans World pushed to expand videogames to 347 f.y.e. stores with a new merchandising display (CED March 6/09 p4). Trans World has a videogames-only f.y.e. in Danbury, Conn. “We'd like to expand back if we can build a business,” Sullivan said. “But we have to get the right allocation and assortment."

Trans World’s Q4 net loss narrowed to $11.4 million from $13.7 million despite a decline in revenue to $156.5 million from $191.4 million on a 7 percent drop in same-store sales. Trans World took a $3.6 million noncash charge against Q4 earnings for long-lived assets, down from $15.2 million. Same-store video sales fell 8 percent, while those of music declined 5 percent. Video was 42 percent of Q4 revenue, followed by music (35 percent), electronics and accessories (14 percent) and videogames (9 percent).

Higgins was paid a $1 million salary in 2009, down from 1.23 million in 2008, but he also was granted 278,898 shares valued at $232,215, the company said in its annual proxy statement. Higgins’s total compensation was $1.41 million, a decline from $1.416 million a year earlier. Higgins also owns Trans World’s 181,500-square-foot headquarters and warehouse in Albany, N.Y., and was paid $2.1 million in rent in 2009, the company said. Higgins had $1.1 million in principal and interest obligations on the facility, the company said. Trans World paid Higgins $40,000 in rent for one store, it said. The chain uses a Higgins-owned airplane for some business trips. It leases the aircraft through Richmor Aviation, paid $94,000 in 2009, the company said.

Higgins is Trans World’s largest shareholder, owning 18.3 million shares (51.8 percent of shares outstanding), followed by Lloyd Miller, 6 million shares (19.2 percent) and PNC Financial Services, 2.79 million (8.9 percent). Trans World employs Higgins’s son, Mark, as vice president of merchandising. Mark Higgins was paid $237,000 in salary in 2009. Former Trans World CEO James Litwak, who left the company this year, was paid a $450,000 salary in 2009, unchanged from the previous year. He got shares valued at $150,000 and his total compensation was $600,000, down from $644,502 the previous year. Sullivan received a $355,000 salary, a decrease from $361,807 the year before. But Sullivan got a $100,000 bonus and his total pay rose to $748,637, up from $514,645, the company said.