The future of Trans World Entertainment Corp. (TWEC) is in question following the company’s third-quarter earnings report and subsequent Securities and Exchange Commission (SEC) filings.
In its SEC Form 10-Q — delivered late — the company says that there is “substantial doubt” about its ability to continue a year from now. TWEC operates roughly 200 FYE (For Your Entertainment) stores in the U.S. In recent years, the FYE product mix has leaned heavily on a growing toys and collectibles business to offset the company’s original focus on packaged media, such as CDs, DVDs, Blu-ray, and video game software.
From TWEC’s Form 10-Q:
“The Company also experienced negative cash flows from operations during fiscal 2018 and 2017, and expects to incur net losses in the foreseeable future. Based on its recurring losses from operations, expectation of continuing operating losses for the foreseeable future, and uncertainty with respect to any available future funding, as well as the completion of other strategic alternatives, the Company has concluded that there is substantial doubt about the Company’s ability to continue as a going concern for a period of one year after the date of filing of this Quarterly Report on Form 10-Q.”
Third-quarter revenue for TWEC decreased by 24.5% to $69.5 million, compared to $92 million during the same period last year. Net loss was $23.3 million, compared to a net loss of $14.1 million last year.
Year-to-date revenue for the 39 weeks ending Nov. 2 decreased 22.4% to $225.6 million, compared to $290.8 million last year. Net loss was $39.1 million, compared to a net loss of $31.7 million last year.
The company saw a 6.3% sales increase in the lifestyle category — which includes toys and collectibles — with the category representing 46.2% of the company’s total revenue for the quarter as compared to 41.9% for the same period last year. In recent months, licensing partnerships have become increasingly important as FYE has debuted exclusive offerings from Garbage Pail Kids, Saturday Night Live, My Hero Academia, and more. FYE also offers a steady stream of exclusive Funko Pop! Vinyl figures.
In addition to FYE, TWEC operates one other reportable business: etailz.
The etailz platform operates as a digital marketplace for a variety of clients. In its Form 10-Q, TWEC reports that etailz “generates substantially all of its revenue through Amazon Marketplace.” Etailz is operating at a loss with revenue for the third quarter declining to $28.6 million, compared to $44.1 million last year.
TWEC grew its business through acquisitions over several decades, eventually assuming the assets of former competitors, such as the Musicland Group. Its store count has decreased over the past decade, falling from 540 in 2010 to 206 in 2019. The current FYE store count includes a handful of locations operating under legacy brands, including Sam Goody, Suncoast, Coconuts, and Manifest, in addition to secondspin.com.