The continuing shift by consumers to buy digital entertainment products plus the sluggish economy resulted in a down year at Hastings Entertainment and is prompting the multimedia chain to change its product mix this year. For the full year, sales fell 4.7%, to $496.4 million, and the retailer had a net loss of $17.6 million compared to earnings of $1.7 million in 2010.
In a release, Hastings chairman John Marmaduke said the company “will shift our business model more toward lifestyle products and become less dependent on entertainment products.” Hasting began carrying certain lifestyle products such as skate boards and related accessories in a number of stores during 2011. This year, Hastings will expand the number of tablets it will offer while reducing the space dedicated to renting movies. Hastings will rollout the format change over the course of 2012, in approximately 55 stores, at an estimated cost of about $3.0 million.
The book category, boosted by the Nextbook Premium 7 e-readers tablet and accessories that Hastings began selling in November, had a good fourth quarter with comp sales up 2.4%, but comps finished down 4.8% for the year. Hastings attributed the decline in book comps to lower sales of new mass market books, hardbacks and trade paperbacks, lower sales of used hardbacks and trade paperbacks, and lower sales of magazines, which were partially offset by sales of the Nextbook. Book comps, excluding sales of the Nextbook, decreased 5.7% for 2011. New book sales were negatively impacted by the increasing popularity of e-readers.
The costs of shifting its product mix as well as what Marmaduke called “difficult economic times and secular trends,” will result in a loss for the current fiscal year. He expects the product changes to bring approximately $9.0 million in additional revenue during the current year, and to generate annual revenue of between $15.0 million to $20.0 million in subsequent years. To cut expenses, Hastings is reducing its capital expenditures from $15.9 million to approximately $9.7 million and will also not open any new stores or relocate any existing stores, while closing one or two underperforming stores. “I am confident that with the [new] business strategies, along with an improvement in current economic conditions, we will return to profitability and grow our business over the years to come," Marmaduke said in a statement.
