Struggling electronics market impacts Hastings revenue in Q4
Amarillo, Texas — Hastings Entertainment reported that net income was approximately $1.2 million, or 15 cents per diluted share, for the fourth quarter ended Jan. 31, compared with a net loss of approximately $8.4 million, or $1.00 per diluted share, for the same period last year. Net loss was approximately $9.3 million, or $1.14 per diluted share, for the fiscal year ended Jan. 31, compared with a net loss of $17.6 million, or $2.05 per diluted share, for the fiscal year ended Jan. 31, 2012.
"Our revenues continue to be negatively impacted by the increasing popularity of digital delivery, rental kiosks and subscription-based services, as well as the longevity of the current video game console cycle" said John Marmaduke, CEO and chairman. "In spite of lower revenues, our pre-tax profit for the fourth quarter increased over the fourth quarter of the prior year. Further, we reduced our pre-tax loss for the fiscal year by $3.7 million, or 29%, compared to the prior year.
"As of the end of the fiscal year, we have introduced our new product categories in forty-four of our 137 superstores. These categories include consumer electronics, music electronics and accessories, hobby, recreation and lifestyle, vinyl and tablets and were the primary driver in increases in comparable revenues of 15.1% and 12.9% for the quarter and full fiscal year, respectively, in our electronics department. We are dedicating approximately 600 linear feet per store to these categories and also increasing linear footage for trends including apparel, kids and seasonal categories along with a reduction in footprint dedicated to rental, music and books. We are encouraged by the results of this change to our business model and look forward to a full year’s performance. Additionally, we plan on expanding these categories to an additional sixty-one stores in fiscal 2013."
Total revenues for the fourth quarter decreased approximately $11.5 million, or 7.5%, to $141.6 million compared with $153.1 million for the fourth quarter of fiscal 2011.
Total revenues for the fiscal year ended Jan. 31, 2013 decreased approximately $33.9 million, or 6.8%, to $462.5 million compared to $496.4 million for the fiscal year ended Jan. 31, 2012.
As of Jan. 31, 2013, the company operated three fewer Hastings superstores, as compared to Jan. 31, 2012.
The ultimate age of retail
Retail innovation cycles last approximately 20 years. As we take a look at retail history, this cycle becomes self-evident. From the general store to department stores to discount stores and so forth, each variety has their day in the sun as the leading channel for most purchases. Today, we’re lucky enough to be living within two powerful cycles simultaneously. But the fun will soon come to an end.
In early December, I was engaged on my annual “slash & grab” Christmas shopping excursion. It’s the one day of the year where I aggressively visit a variety of stores and web sites to take care of my giving list for the season.
One of the items on my list was cordless headphones for our stereo. I went to Best Buy and found a pair of Sony headphones. The price was $99. That felt really high to me. With my smartphone, I scanned the UPC on the box and quickly found that Amazon.com sold the exact same item for $59. To add to my bonanza, no sales tax would be added to my online purchase and as an Amazon Prime member, shipping would be free. So in effect the price difference was actually $110 vs $59. No contest. The sad reality was that without putting them on my head in the store or being able to carefully study the box, I might not have bought them at all.
Of course, my behavior has a new name within retail circles — showrooming. Now, I recognize that Best Buy was willing to match the online price at the store. And I wish I had taken this path to see how it worked for me. But this effort on their part doesn’t answer the larger question.
The larger question being…how long can this continue?
My ability to visit well-apportioned, visibly-appealing showrooms while testing, sampling, and otherwise evaluating products in a comfortable environment, then quickly touch a few buttons on my iPhone to purchase the items I want from the cheapest option my phone can find demonstrates true retail bliss for the consumer.
Clearly both e-commerce and brick-and-mortar infrastructures can’t continue like this forever. One can’t operate long term at a loss while the other attempts to maximize its margins.
In retail, at least since World War II, we’ve seen 20-year cycles of innovation. The first twenty years after the war saw huge growth in department stores and chain store brands. The 70’s and 80’s saw the rise of discount merchandising. From 1990 – 2010, the big box retailers have ruled the merchandise universe. Of course, this phenomenon has overlapped with the Internet and e-commerce — creating what I call the Ultimate Age of Retail.
These two systems have both captured our imagination and our wallets. But very soon, both systems will need to find their respective niches. As product lines like music, software, and movies cease being available in a physical store, neither will the UPS man deliver 50-pound bags of dog food to your door. These are the obvious examples. But expect to see many other product lines become primarily purchased in a more standard common-sense way, even as the number of ways we purchase products multiplies.
I know all of industry hype surrounding the power of the consumer and how they will each dictate individually how they want to purchase products and services. Much of this hype comes from me! But at the end of day, economics and the power of the dollar ultimately win out –pushing consumers to the most efficient approach.
Allow me to provide a certain future state scenario. Once ninety percent of shoppers own and use a smartphone, will retailers continue spend significant capital to build 20-plus cash registers at a venue to expedite shopper purchases? What if the remaining ten percent of shoppers want to check out the old fashion way? How will retailers accommodate them? At what point will this accommodation no longer be supported? Will shoppers need to download a retailer’s specific smartphone application in order to transact purchases? What if they have no desire to do this? Will retailers basically force all of their shoppers to become “members” to buy their goods?
I’m not sure what the future holds. What I do know is that the retailing industry is entering into a transformation similar to the one that the music and newspaper industries have been experiencing over the past ten years.
Expect to see significant changes in the non-sustainable golden age of retail starting about 2016, which is approximately 20 years after e-commerce became a valid option for consumers.
By this time, the retail industry (that includes both online and brick & mortar) will find the right approaches in selling and supporting each relevant category. Until then, enjoy that showroom.
Michael Hiatt is the president of Dynamic Retailing, LLC—a retail consultancy focused on helping both retailers and service providers maximize their customer-facing technologies to improve and enhance the shopping experience. He can be reached at [email protected]
Former IBM exec joins board of revenue management company
ServiceSource, a provider of recurring revenue management, has announced that Robert Ashe, a proven industry software CEO at Cognos and former IBM executive, has joined its board of directors. Ashe’s appointment adds key talent to continue building leading edge functionality into Renew OnDemand, the world’s only cloud application designed to increase recurring revenue, and to rapidly deploy customers on this new SaaS platform.
“Adding experienced industry thought leadership to our board of directors is critical as we continue to expand our vision of recurring revenue management. From his work at IBM and Cognos in growing innovative and market-leading businesses, Robert Ashe brings years of critical experience to our Board of Directors,” said Mike Smerklo, ServiceSource CEO. "We look forward to utilizing his great wealth of industry knowledge and expertise to help us scale and grow our Renew OnDemand SaaS business, as well as our managed services."
Ashe was president, CEO and director of Cognos, an industry leader in business intelligence and performance management. From 1984 through 2008 Rob held executive positions leading Cognos on a highly successful growth and development path. In 2008, Cognos was acquired by IBM for $5 billion. In January 2010, Rob was promoted to General Manager of Business Analytics at IBM. Rob retired from IBM in January 2012.
ServiceSource also appointed Tim Fleming as SVP of engineering and Dave Canelis as SVP of global professional services.
“We are fortunate to have attracted proven leaders with such outstanding track records as Tim and Dave,” said Mike Smerklo. “Their experience and expertise will be invaluable as we work to rapidly grow and deploy Renew OnDemand.”
Fleming joins the ServiceSource executive team as SVP of engineering with 25 years of diverse executive and product development experience in the software and SaaS industry. Tim helped establish E*TRADE as a leading ecommerce company by building the technology organization while developing a highly successful international product offering. Tim also modernized Visa’s global endpoint infrastructure, transforming the existing legacy product to an open systems-based, distributed computing-based access solution. Under Tim’s leadership, Visa increased penetration by more than 400% in 2 years, reducing overall endpoint costs by more than 60%.
Canelis has built and managed highly successful large and small service organizations, delivering scalable, configurable solutions used in mission critical applications. Dave joins the ServiceSource executive team as SVP of global professional services with over 30 years of experience in creating best-in-class global professional services organizations. Before joining ServiceSource Dave was VP global services at WebTrends, where he led professional services, technical support, and education / training. In just over four years, WebTrends grew revenue, profitability, and customer satisfaction while creating new service lines and offerings. Previously, he served as VP professional services at Serena Software, a leading provider of enterprise application lifecycle management, where he was responsible for consulting and training. Prior to Serena Software, Dave held senior positions at Oracle and Oblix.