UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 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): May 30, 2019
TRANS WORLD ENTERTAINMENT CORPORATION
(Exact Name of Registrant as Specified in Charter)
| New York | 0-14818 | 14-1541629 | ||
| (State or Other Jurisdiction | (Commission | (I.R.S. Employer | ||
| of Incorporation) | File Number) | Identification No.) |
38 Corporate Circle,
Albany, New York 12203
(Address of Principal Executive Offices, and Zip Code)
(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 (see General Instruction A.2. below):
| o | Written communication 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 communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
| o | Pre-commencement communication 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 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company o
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
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
| Common shares, $0.01 par value per share | TWMC | NASDAQ Stock Market |
ITEM 2.02. RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Attached hereto as Exhibit 99.1 is the transcript for the earnings conference call of Trans World Entertainment Corporation held on May 30, 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.
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 99.1 is the transcript for the earnings conference call of Trans World Entertainment Corporation held on May 30, 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 2, 2019.
ITEM 9.01. FINANCIAL STATEMENTS AND EXHIBITS
(d) EXHIBITS. The following are furnished as Exhibits to this Report:
| Exhibit | ||
| No. | Description | |
| 99.1 | Trans World Entertainment Corporation Transcript for Earnings Call held on May 30, 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 | ||
| /s/ Edwin Sapienza | ||
| Date: May 30, 2019 | Edwin Sapienza | |
| Chief Financial Officer |
3
EXHIBIT INDEX
| Exhibit | ||
| No. | Description | |
| 99.1 | Trans World Entertainment Corporation Transcript for Earnings Call held on May 30, 2019. |
Exhibit 99.1
TWMC - Q1 2019 Trans World Entertainment Corp Earnings Call
CORPORATE PARTICIPANTS
Edwin J. Sapienza Trans World Entertainment Corporation - CFO & Secretary
Michael Feurer Trans World Entertainment Corporation - CEO & Director
PRESENTATION
Operator
Good day, ladies and gentlemen, and welcome to the Trans World Entertainment First Quarter 2019 Results Conference Call. (Operator Instructions)
At this time, it is my pleasure to turn the floor over to your host for today, Mr. Michael Feurer. Sir, the floor is yours.
Michael Feurer - Trans World Entertainment Corporation - CEO & Director
Thank you, Jess. Good morning. Thank you for joining us as we discuss our first quarter results. On the call with me today is Ed Sapienza, our Chief Financial Officer.
For the fye segment, comparable store sales were flat compared to the first quarter of last year, driven by a 7.3% positive increase in our lifestyle categories. Our customers continue to respond positively to our exclusive, unique and engaging merchandise point of view.
In the etailz segment, we saw the benefits of the performance improvement initiatives begun in the fourth quarter of 2018, highlighted by improved gross margins, lower SG&A expenses, improved supply chain efficiency and operating process improvements. As a result of the initiatives and disciplined inventory management in the fye segment, we were able to reduce cash used in operations by over $10 million for the first quarter as compared to the first quarter of last year.
Now Ed will take you through financial highlights for the first quarter.
Edwin J. Sapienza - Trans World Entertainment Corporation - CFO & Secretary
Thanks, Mike. Good morning, everyone. Consolidated revenue for the quarter was $80.2 million versus $96.6 million last year.
In the fye segment, comparable store sales were flat compared to last year as a comp increase of 7.3% in our lifestyle category was offset by declines in electronics and our heritage media categories. Electronics declined 4.3% compared to the same period last year. The lifestyle and electronics categories combined represented 54% of our revenue as compared to 50% in the first quarter of last year. Media
category comp sales declined 5.1% for the quarter and represented 46% of the fye segment sales compared to 50% last year. Music sales were down 0.1% and video sales were down 8%.
In the etailz segment, revenue for the first quarter was $35.1 million as compared to $42.5 million during the comparable first quarter last year. The decline in revenue was due to the vendor rationalization and remediation initiative. Rationalization and remediation activities included eliminating and transitioning unprofitable vendors and improving vendor relationships through negotiations focused on improvements to gross margins and supply chain efficiencies.
Consolidated gross profit for the quarter was $25.4 million or 31.7% of revenue compared to $31.7 million or 32.8% of revenue last year. In the fye segment, the gross margin rate was 38.9% of revenue compared to 41.2% last year. Gross margin improved throughout the quarter as we refreshed our lifestyle merchandise following the holiday season. In the etailz segment, gross profit for the first quarter was $7.9 million or 22.5% of revenue versus $9.4 million or 22.1% last year.
Consolidated SG&A expenses for the quarter were $32 million or 39.9% of revenue compared to $36.5 million or 37.8% last year. In the fye segment, SG&A expenses decreased $3.5 million or 13.1% for the first quarter to $23 million. The decline in SG&A expenses was due to fewer stores in operation and other expense saving initiatives implemented in the fourth quarter of 2018. In the etailz segment, SG&A expenses for the first quarter were $9 million or 25.5% of revenue compared to $10 million or 23.5% 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 2018.
Consolidated operating loss for the quarter was $7.6 million compared to an operating loss of $8.2 million last year. For the first quarter, our net loss was $7.8 million or $0.21 per diluted share as compared to a net loss of $8.1 million or $0.22 per diluted share last year.
Cash and cash equivalents at the end of the first quarter were $4 million compared to $15 million last year. Cash used in operations was reduced by $10.4 million compared to the same period last year. As of May 4, 2019, borrowings under our credit facility were $3.1 million, with $23.1 million in remaining availability on the facility.
Inventory was $88 million at the end of the first quarter versus $111 million at the end of last year. In the fye segment, inventory per square foot was $60 at the end of the first quarter, the same level as at the end of the first quarter of last year.
We ended the quarter with 206 stores and 1.1 million square feet in operation versus last year’s 253 stores and 1.4 million square feet.
Now I’ll turn it back over to Mike.
Michael Feurer - Trans World Entertainment Corporation - CEO & Director
Thanks, Ed. In the fye segment, we continue to see progress from our ongoing efforts to change our merchandise point of view based on unique, relevant, collaborative as well as exclusive merchandise. This will drive the continued reinvention of the fye brand throughout 2019.
Etailz represents a top marketplace retailer at scale. 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. Our primary initiatives include utilizing a profit-driven approach to rationalize and transition our vendor portfolio, streamline core operations and increase the value proposition for our vendor partners.
In order to create a leaner organization that is better aligned with current and future business focus, etailz implemented a 30% reduction in workforce. In addition, we implemented expense reductions across the organization. etailz is also in the process of implementing strategies designed to further improve working capital efficiencies, including inventory — increasing inventory turns and decreasing Amazon storage fees. In addition to these initiatives, utilizing technology, data and operating expertise, etailz has identified other strategic growth opportunities, including offering a broader selection of merchandise with limited inventory investments through dropship relationships with key vendors, utilizing robust technology and data capabilities to identify higher margin private label opportunities and continuing to offer and build agency services informed by etailz’ in-place technology and expertise. The company is committed to taking steps to improve operating results for both segments as management diligently executives its strategy to deliver value for shareholders.
This concludes our call. I’d like to thank you for your time today, and we look forward to talking to you about our second quarter results — 2019 results in August. Thank you.
Operator
Thank you for your participation. Ladies and gentlemen, you may disconnect at this time. Have a great day.