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): March 3, 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 March 3, 2016, Trans World Entertainment Corporation issued a press release announcing its financial results for its fiscal quarter and annual ended January 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 March 3, 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 March 3, 2016.
99.2	Trans World Entertainment Corporation Transcript for Earnings Call held on March 3, 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
	/s/ John Anderson
Date:  March 4, 2016	John Anderson
	Chief Financial Officer

EXHIBIT INDEX

Exhibit No.	Description
99.1	Trans World Entertainment Corporation Press Release dated March 3, 2016.
99.2	Trans World Entertainment Corporation Transcript for Earnings Call held on March 3, 2016.

EX-99.1

Exhibit 99.1

	Contact: Trans World Entertainment John Anderson Chief Financial Officer (518) 452-1242	Contact: Financial Relations Board Marilynn Meek (mmeek@frbir.com) (212) 827-3773
Contact: 38 Corporate Circle Albany, NY 12203

www.twec.com  NEWS RELEASE 

TRANS WORLD ENTERTAINMENT ANNOUNCES FOURTH QUARTER AND ANNUAL RESULTS

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

Reports net income of $9.9 million for the Fourth Quarter

Albany, NY, March 3, 2016-- Trans World Entertainment Corporation (Nasdaq: TWMC) today reported financial results for the thirteen (“Fourth Quarter”) and fifty-two week periods (“Fiscal 2015”) ended January 30, 2016.

“We are pleased with the progress we made in 2015. Improvements in our merchandise assortment and presentation helped us deliver flat comparable store sales and historically high gross margins,” commented Mike Feurer, Company CEO. “While there is still work to be done, these results validate we are successfully leveraging our heritage, industry relationships and hard earned credibility with our customers to achieve our vision. We emerge from 2015 with confidence in our path, as we continue to make progress in our evolution to become the leading entertainment and pop culture centric experience in the marketplace.” Mr. Feurer added.

Fourth Quarter Overview

· For the thirteen weeks ended January 30, 2016 (“Fourth Quarter”), the Company reported net income of $9.9 million, or $0.32 per diluted share as compared to a net income of $11.7 million, or $0.37 per diluted share, for the same period last year.

· Comparable store sales for the Fourth Quarter were flat compared to the same quarter last year. Total sales for the Fourth Quarter decreased 4.4% to $121.3 million compared to $126.9 million in 2014. At the end of the year, the Company operated 299 stores compared to 310 stores last year, a decline of 3.5%.

· Gross profit for the Fourth Quarter was $45.9 million, or 37.9% of sales, as compared to $46.6 million, or 36.7%, of sales for the fourth quarter last year. The increase in gross profit as a percentage of sales was primarily due to increased margin rate in the majority of our categories and the contribution shift to the higher margin trend category.

· Selling, general and administrative expenses (“SG&A expenses”) increased 3.6% for the Fourth Quarter to $34.3 million, or 28.2% of sales, compared to $33.1 million, or 26.0% of sales for the same period last year. The increase in SG&A expenses for the quarter was due to higher annual employee incentives.

· During the Fourth Quarter, the Company repurchased 121,957 shares of common stock at an average price of $3.58 per share. Since the inception of the program, the Company has repurchased 1,872,043 shares of common stock at an average price of $3.82 per share. The Company has approximately $14.8 million available for purchase under its repurchase program

Fiscal 2015 Overview

· The Company reported a 51% increase in net income to $2.7 million, or $0.09 per diluted share, from $1.8 million, or $0.06 per diluted share for the 52 weeks ended January 31, 2015 (“Fiscal 2014”). As previously reported, operating results included a one-time reimbursement of expenses incurred in prior years related to a legal settlement of $1.4 million recorded in the second quarter.

· Comparable store sales for the year declined 0.7%. Total sales decreased 6.6% to $334.7 million compared to $358.5 million in Fiscal 2014.

· Gross profit was $130.6 million, or 39.0% of sales, compared to $135.9 million, or 37.9% of sales, for Fiscal 2014.

· SG&A expenses decreased 5.4% to $121.3 million compared to $128.2 million in Fiscal 2014. As a percentage of sales, SG&A expenses were 36.3% in Fiscal 2015 compared to 35.8% in Fiscal 2014.

· Operating income for the year increased 21% to $4.6 million as compared to $3.8 million in Fiscal 2014.

· During Fiscal 2015, the Company opened six and remodeled four stores under a new format.

Trans World will host a teleconference call today, Thursday, March 3, 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 and related products. The Company operates retail stores in the United

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States, the District of Columbia 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)

	Thirteen Weeks Ended										Fiscal Year Ended
	January 30, 2016		% to Sales			January 31, 2015		% to Sales			January 30, 2016		% to Sales			January 31, 2015		% to Sales
Net sales	$	121,321				$	126,910				$	334,661				$	358,490
Cost of sales		75,390		62.1	%		80,350		63.3	%		204,088		61.0	%		222,572		62.1	%
Gross profit		45,931		37.9	%		46,560		36.7	%		130,573		39.0	%		135,918		37.9	%
Selling, general and administrative expenses		34,254		28.2	%		33,058		26.0	%		121,334		36.3	%		128,237		35.8	%
Depreciation and amortization		1,429		1.2	%		1,313		1.0	%		4,668		1.3	%		3,906		1.1	%
Income from operations		10,248		8.4	%		12,189		9.6	%		4,571		1.4	%		3,775		1.1	%
Interest expense, net		332		0.3	%		452		0.4	%		1,699		0.5	%		1,881		0.5	%
Income before income taxes		9,916		8.2	%		11,737		9.2	%		2,872		0.9	%		1,894		0.5	%
Income tax expense		48		0.0	%		—		0.0	%		181		0.1	%		116		0.0	%
Net income	$	9,868		8.1	%	$	11,737		9.2	%	$	2,689		0.8	%	$	1,778		0.5	%
Basic income per common share:
Basic income per share	$	0.32				$	0.37				$	0.09				$	0.06
Weighted average number of common shares outstanding - basic		31,098					31,431					31,167					31,744
Diluted income per common share:
Diluted income per share	$	0.32				$	0.37				$	0.09				$	0.06
Weighted average number of common shares outstanding - diluted		31,249					31,542					31,323					31,897
SELECTED BALANCE SHEET CAPTIONS: (in thousands, except store data)											January 30, 2016					January 31, 2015
Cash and cash equivalents											$	104,311				$	118,537
Merchandise inventory												120,046					126,378
Fixed assets (net)												30,665					15,769
Accounts payable												50,869					63,527
Borrowings under line of credit												—					—
Long-term capital lease obligations, less current portion												—					—
Stores in operation, end of period												299					310
Stores in operation, average during the period												309					329

EX-99.2

Exhibit 99.2

Trans World Entertainment’s (TWMC) on Q4 and Annual 2015 Results - Earnings Call

Transcript

Mar. 3, 2016 10:00 AM ET

Operator

Greetings, and welcome to Trans World Entertainment Corporation fourth quarter and annual conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to turn the call over to your host, Mr. Mike Feurer, Chief Executive Officer of Trans World Entertainment. Thank you. You may begin.

Mike Feurer

Thanks, Rob. Good morning. Thank you for joining us as we discuss our fourth quarter and annual 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 pleased with the progress made in 2015, improvements in our merchandise assortment and presentation helped us deliver flat comp sales and historically high gross margins. We emerged from 2015 with confidence in our path as we continue to make progress in our evolution to become the leading entertainment and pop culture centric experience in the marketplace.

We made investments throughout the year in merchandising infrastructure, organization and technology to support future growth and improve our store productivity. These investments included the chain wide rollout of new marketplace fixtures to support the shift in our merchandise assortment and technology enhancements to improve analytics and increase efficiencies.

In addition, we invested in a new store format. We opened six new stores and remodeled four stores under this new format. We’re encouraged by the performance of these new stores and remodels. 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. At the same time, we continue to better manage our investment in inventory, including reducing inventory per

square foot to $69 versus $70 per square foot at the end of 2014 and $74 per square foot at the end of fiscal 2013.

Now, John will take you through financial highlights for the fourth quarter and fiscal year.

John Anderson

Thanks, Mike. Good morning, everyone. For the fourth quarter, our net income was $9.9 million or $0.32 per diluted share as compared to net income of $11.8 million or $0.37 per diluted share in the fourth quarter of 2014. Our comp store sales were flat for the quarter. Total sales were $121.3 million, a decrease of 4% compared to last year, in line with the reduction in store count. Our gross margin rate for the quarter increased 120 basis points to 37.9% of sales from 36.7% last year, driven by increases in the majority of our merchandising categories and the contribution shift to the higher margin trend category.

SG&A expenses were $34.3 million, an increase of 3.6% from last year’s fourth quarter. SG&A expenses, as a percent of sales, were 28.2% as compared to 26% for the same period last year. The increase in SG&A expenses for the quarter was due to higher annual employee incentives. EBITDA for the quarter was $11.7 million as compared to $13.5 million last year. Net interest expense was $332,000 in the quarter versus $452,000 last year.

Now, let me touch on our annual results. For fiscal 2015, our net income increased 51% to $2.7 million or $0.09 per diluted share compared to $1.8 million or $0.06 per diluted share for fiscal 2014. As previously reported, operating results included a one-time reimbursement of expenses incurred in prior years related to a legal settlement of $1.4 million recorded in the second quarter.

For fiscal 2015, comparable store sales were down 0.7% compared to fiscal 2014. Total sales for fiscal 2015 decreased 6.6% to $334.6 million from $358.5 million for fiscal 2014. Our gross margin rate for the year increased 110 basis points to 39% of sales from 37.9% last year. Annual SG&A expenses were $121.3 million, a reduction of 5.4% from the prior year. SG&A expenses as a percent of sales were 36.3% as compared to 35.8% last year.

For fiscal 2015, EBITDA improved 20% to $9.2 million as compared to $7.7 million last year. Net interest expense was $1.7 million for the year compared to $1.9 million last year.

Year-over-year, we have lowered our inventory by $6 million and finished the quarter with a $120 million in inventory, 5% below last year’s $126 million. Inventory per square foot was $69 at the end of the year as compared to $70 per square foot last year.

We ended the year with $104 million in cash compared to $119 million last year. As Mike highlighted, we continue invest in the business to support our strategic initiatives. We have made investments in new and remodeled stores, the chain-wide rollout of new marketplace fixtures and technology enhancements, including the chain-wide roll-off of a new point of sales system and traffic counters.

During the fourth quarter, the company repurchased approximately 122,000 shares of common stock, have an average price of $3.58 per share. Since the inception of the program, the company has repurchased approximately 1.9 million shares of common stock at an average price of $3.82 per share. The company has approximately $14.8 million available for purchase under its repurchase program.

We ended the year with 299 stores and 1.7 million square feet in operation versus last year’s 310 stores and 1.8 million square feet.

Now, Scott will take you through our merchandize 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 Q4 were flat versus last year and represents the third consecutive quarter with flat comp sales. For the year, comparable store sales declined 0.7%.

In our trend category, comp sales increased 39% for the quarter. We continue to take advantage of opportunities to strengthen our assortment, shift our inventory mix and improve our product presentation and value proposition. Sales in our trend category continued to be driven by both hardline and softline goods. Trend represented 29% of our business for the quarter compared to 20% last year. For the year, comp sales for trend increased 40%. Trend represented 22% of our business for the year compared to 15% last year.

For the quarter, electronics comp sales increased 20% driven by expansions in our assortment and improved presentation. Electronics represented 13% of our business for the quarter compared to 11% last year. For the year, comp sales for electronics increased 13%. Electronics represented a 11% of our business for the year compared to 10% last year.

Video comp sales declined 16% for the quarter. Video represented 33% of our business during the quarter compared to 40% last year. As discussed on the last call, we continue to see industry-wide declines in physical video due to non-physical options and we are adjusting our inventory position accordingly. For the year, comp sales for video declined 11%. Video represented 40% of our business during the year compared to 44% last year.

Music comp sales declined 6% for the quarter. Within the music category, we are seeing growth in vinyl which is helping to offset declines in CDs. The music category represented 22% of our business for the quarter compared to 24% last year. For the year, comp sales for music declined 6%, and represented 25% of our business for the year compared to 27% last year.

Video game comp sales were down 52% for the quarter Video game sales represented 2% of our business for the quarter compared to 4% last year. We continue to shift our inventory investments and space allocation away from games to our higher margin growth categories. Game sales represented 2% of our business for the year compared to 4% last year. Our fourth quarter sales results highlight our opportunity and I continue to be encouraged about our direction.

Now I’ll turn it back over to Mike.

Mike Feurer

Thank you, Scott. While there’s still work to be done, our results validate 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 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 build upon the following priorities to deliver our vision of becoming the most compelling entertainment and pop culture centric engagement in the marketplace: by champion a culture of innovation, experimentation and driving the business, further engage complimentary world-class talents to capitalize on strategic opportunities, evolve the brand customer experience, evolve and deploy the economical repeatable omnichannel model for the future, modernize our technological capability, and engage dynamic alliances and collaborations required to unlock our full potential.

Further, after careful consideration, the Board of Directors has decided to continue the company’s current buyback program, including block purchases when available and appropriate. In addition, the company intends to continue to utilize its financial position to accelerate growth and profitability. As it has in the past, the board will continue to review and evaluate alternatives to maximize shareholder value.

Now I’d like to open the call to questions.

Question-and-Answer Session

Operator

Thank you. [Operator Instructions] Our first question is from William Meyers with Miller Asset Management. Please proceed with your question.

William Meyers

Hi, congratulations on the quarter. I noticed your - I think you said trend was 29% of business and electronics was 13% of business. So you’re approaching those two categories being half your business, should we be thinking about your stores differently not just as or not primarily as sellers of physical music and video media, are they really changing into something else at this point?

Mike Feurer

Hi William, how are you? Thanks for the question. I think that’s a great way to think about it, we’re evolving from a company that was a destination for commodity product and we’re leveraging 40 years of tremendous opportunity in the entertainment space now into a more lifestyle oriented experience.

William Meyers

Well, let me follow up with a couple of specifics, you said vinyl was growing, is it a significant percentage of your music sales at this point or is it growing still of a very small base?

John Anderson

It’s still a pretty small percent of our overall sales; it’s about 2% at this point.

Mike Feurer

It is interesting in line with your overall question about the experience and what that tends to also bring to the store in regards to credibility. Credibility is something that we’ve worked very hard for with our customers and within the industry with our vendor partners and that’s what’s allowing us to have success that we’re having on this path.

William Meyers

And would I be right was going to calculate it here but I didn’t quite get to it, are your sales per store up year-over-year, would that be correct?

John Anderson

Yeah, on a per square foot basis both the sales and GP are up year-over-year.

William Meyers

Would that be primarily from closing underperforming stores or is there some other story there?

John Anderson

There is the closing of underperforming stores but also there is the shrinking of our overall square footage driving us to more productivity out of our current stores.

Mike Feurer

I would like to thank you for your time today and we look forward to talking to you about our first quarter 2016 results on May 19th. Thank you everyone.