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Hastings Entertainment Inc. Reports Operating Results (10-Q)

December 09, 2011 | About:
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10qk

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Hastings Entertainment Inc. (HAST) filed Quarterly Report for the period ended 2011-10-31.

Hastings Entertainment Inc. has a market cap of $13.1 million; its shares were traded at around $1.52 . Hastings Entertainment Inc. had an annual average earning growth of 6.8% over the past 10 years.

Highlight of Business Operations:

Gross Profit Rental. For the third quarter, total rental gross profit dollars decreased approximately $1.7 million, or 15.2%, to $9.5 million from $11.2 million for the same period in the prior year, primarily due to lower revenues along with lower rental margin rates. As a percentage of total rental revenue, rental gross profit decreased to 60.2% for the quarter compared to 63.5% for the same period in the prior year, also primarily due to lower revenues, partially offset by lower shrinkage expense.

Selling, General and Administrative Expenses (SG&A). As a percentage of total revenue, SG&A increased to 42.5% for the third quarter compared to 40.7% for the same period in the prior year due to deleveraging resulting from lower revenues. SG&A increased approximately $0.5 million during the quarter, or 1.1%, to $46.2 million compared to $45.7 million for the same quarter last year. The main drivers increasing SG&A included an increase in store labor costs of approximately $0.3 million, an increase of approximately $0.1 million in store maintenance costs and an increase of approximately $0.1 million in store supplies. These increases were primarily offset by a decrease in store utility costs of approximately $0.2 million and a decrease in occupancy costs of approximately $0.2 million.

Gross Profit Rental. For the current nine months, total rental gross profit dollars decreased approximately $4.7 million, or 12.7%, to $32.3 million from $37.0 million for the same period in the prior year primarily due to lower revenues, along with lower rental margin rates. As a percentage of total rental revenue, rental gross profit decreased to 61.2% for the current nine month period compared to 63.0% for the same period in the prior year, also primarily as a result of lower rental revenues.

Selling, General and Administrative Expenses (SG&A). As a percentage of total revenue, SG&A increased to 39.2% for the current nine months compared to 37.7% for the same period in the prior year primarily due to deleveraging resulting from lower revenues. SG&A decreased approximately $1.2 million, or 0.9%, to $134.6 million compared to $135.8 million for the same period last year. The main drivers of the decrease in SG&A included a decrease in bonuses under our bonus incentive programs of approximately $0.7 million, a decrease in associate health insurance costs of approximately $0.5 million, and a decrease in advertising expenses of approximately $0.6 million. These decreases were partially offset by an increase in store maintenance costs of approximately $0.5 million.

Operating Activities. Net cash used by operating activities totaled approximately $12.7 million for the nine months ended October 31, 2011, compared to cash provided by operating activities of $7.0 million for the nine months ended October 31, 2010. Net loss for the current period was approximately $9.2 million compared to $2.1 million for same period in fiscal 2010. Merchandise inventories increased approximately $27.6 million for the current period, compared to $11.0 million during the same period in fiscal 2010 primarily due to differences in the timing and amount of inventory build-up based on anticipated sales for the holiday season, along with the build of inventory for our new TRADESMART store which opened August 1, 2011 and the build of inventory related to our roll-out of electronic book reader tablets. Trade accounts payable increased $21.8 million for the current period compared to an increase of $21.3 million during the same period in fiscal 2010. Merchandise inventories, net of trade accounts payable, increased approximately $5.8 million for the current period compared to a decrease of $10.2 million for the same period in the prior year primarily due to the higher increase in merchandise inventories in the current period and differences of timing of payments to vendors surrounding the holiday purchases in the current year compared to the prior year. Accrued expenses and other liabilities increased approximately $0.2 million during the current period compared to a decrease of $1.2 million during the same period in fiscal 2010 primarily due to the timing of payments of property taxes, along with higher salary accruals as compared to the prior year.

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