Hastings Entertainment Inc. (HAST) filed Quarterly Report for the period ended 2009-07-31.
Hastings Entertainment Inc. is the leading multimedia entertainment retailer that combines the sale of books music software periodicals DVDs videos and video games with the rental of videos DVDs and video games in a superstore format. The company currently operates superstores primarily in small to medium-sized markets throughout the United States. Hastings also operates www.gohastings.com an e-commerce Internet Web site that makes available to its customers new and used entertainment products and unique contemporary gifts and toys. (PRESS RELEASE) Hastings Entertainment Inc. has a market cap of $38.3 million; its shares were traded at around $3.94 with a P/E ratio of 21.8 and P/S ratio of 0.1. Hastings Entertainment Inc. had an annual average earning growth of 18.7% over the past 5 years.
Highlight of Business Operations:
Hardback Café Comps increased 17.2% for the quarter, compared to the second quarter in the prior year, primarily as a result of the opening of an additional five cafés in existing stores during the quarter and increased sales of specialty café drinks, mugs and baked goods. Electronics department Comps increased 3.3% for the quarter, primarily due to strong sales of third party gift cards, hardware including digital converter boxes and Blu-ray DVD players and accessories for iPods and MP3 players, partially offset by lower sales of refurbished iPods during the quarter. Consumable Comps increased 3.0% for the quarter, primarily resulting from increased sales of assorted candies and gums. Trends Comps increased 0.8% during the quarter. Strong sales of novelty items, including barware, magnets and gag gifts, and increased sales of sports memorabilia, action figures, children’s toys and t-shirts were offset by lower sales of Webkinz plush products and greeting cards. Books Comps decreased 1.7% for the quarter, primarily as a result of lower sales of new hardbacks, new trade paperbacks and magazines, partially offset by strong sales of used and value books. Movie Comps decreased 8.1% for the quarter, primarily due to lower sales of new and used DVDs and lower sales of DVD boxed sets, partially offset by increased sales of Blu-ray DVDs. Music Comps decreased 15.6% for the quarter due to lower sales of new CDs, resulting directly from a continued industry decline and reduced footprint in thirty-eight stores. Merchandise Comps, excluding the sale of new music, decreased 5.7% for the quarter. Video Game Comps decreased 20.9% for the quarter, primarily due to lower sales of video game consoles and lower sales of older generation video games, partially offset by increased sales of used video games for the Nintendo, XBOX 360 and Sony Playstation 3.
Rental Comps decreased 10.1% for the quarter, primarily as a result of fewer rentals of DVDs and increased promotions offered during the current quarter, partially offset by increased rentals of Blu-ray movies and video games. Comparable promotional coupons increased significantly, which decreased Rental Comps by 2.1%. DVD rentals were lower due to fewer titles released with gross box office revenues in the range of $20 million to $80 million, which typically represent our strongest rentals. The decrease in Rental Comps has been driven by fewer titles released in the first six months of fiscal 2009 as well as the de-valuing of the price of a rental movie primarily as a result of the growth of rental kiosks renting movies for a dollar per day. We also implemented a promotion where thousands of titles in our stores now rent for $0.99 per day, which has lowered rental revenues in the short-term. As a result of this promotion, we are seeing a significant increase in units rented along with growth in new customer membership sign-ups. Rental Video Game Comps increased 6.9% for the quarter while Rental Video Comps decreased 12.2%.
Gross Profit — Merchandise. For the second quarter, total merchandise gross profit dollars decreased approximately $1.1 million, or 3.5%, to $30.6 million from $31.7 million for the same period last year, primarily as a result of lower merchandise revenues, partially offset by increased margin rates. As a percentage of total merchandise revenue, merchandise gross profit increased to 31.4% for the quarter compared to 30.5% for the same period in the prior year resulting from improved inventory management.
Gross Profit — Rental. For the second quarter, total rental gross profit dollars decreased approximately $1.3 million, or 9.2%, to $12.9 million from $14.2 million for the same period in the prior year, primarily due to lower rental revenues. As a percentage of total rental revenue, rental gross profit remained constant at 65.2% for the quarter when compared to the same period in the prior year.
Selling, General and Administrative Expenses (“SG&A”). As a percentage of total revenue, SG&A increased to 37.4% for the second quarter compared to 35.3% for the same quarter in the prior year due to deleveraging resulting from lower revenues. SG&A decreased approximately $0.4 million during the quarter, or 0.9%, to $43.9 million compared to $44.3 million for the same quarter last year. In accordance with our management incentive programs, no bonuses were earned for the first six months of fiscal 2009, which represents the majority of the decrease in SG&A from the prior year. Increases in store occupancy costs associated with the operation of new, expanded and relocated stores and increased advertising costs were offset by reductions across most expense categories resulting from improved expense management.
Interest Expense. For the second quarter, interest expense decreased approximately $0.2 million, or 40%, to $0.3 million, compared to $0.5 million during fiscal 2008 resulting primarily from lower interest rates. The average rate of interest charged for the quarter decreased to 2.53% compared to 4.02% for the same period in the prior year.
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