Following a disappointing third quarter and an ominous statement expressing “substantial doubt” about its ability to continue for another year, Trans World Entertainment (TWEC) has agreed to sell its FYE stores to a subsidiary of Sunrise Records and Entertainment Ltd. 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 discs, and video game software.
Sunrise, which operates Sunrise Records in Canada and HMV Records in the UK, will assume substantially all assets of TWEC’s Record Town Inc. business, best-known to consumers under the FYE (formerly For Your Entertainment) brand. The $10 million cash purchase is subject to a net inventory and other adjustments, plus an assumption of certain liabilities.
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, which is included in the sale.
Following the successful completion of the transaction during the first quarter, TWEC will be left with just one reportable business: etailz.
The etailz platform operates as a digital marketplace for a variety of clients. Last month, TWEC reported that etailz “generates substantially all of its revenue through Amazon Marketplace.” Etailz has also been operating at a loss with revenue for the third quarter of last year declining to $28.6 million, compared to $44.1 million in the third quarter of 2018.
Until the transaction closes, TWEC says it plans to operate its business as usual, and that Sunrise plans to keep “substantially all of the current FYE employees.”
To put things in perspective as TWEC prepares to unload FYE for just $10 million: when the company bought the scraps of the Musicland Group out of bankruptcy in 2006, the company paid $104.2 million in cash and assumed $18.1 million liabilities.
Sunrise Records has expanded via acquisition in recent years, having taken over HMV Canada locations in 2017, followed by its acquisition of HMV UK last year. Owner and President Doug Putman is also the president of North American toy distributor Everest Toys.
