Since Christmas, DVD disc sales have been 9% of total video sales in Musicland stores.................
INTERVIEW-Musicland sees 30-40 1998 store closings
By Gregory Crawford
CHICAGO, Jan 23 (Reuters) - Musicland Stores Corp
expects to close 30 to 40 stores this year, down sharply from
the 106 stores closed last year as it struggled to return to
profitability, senior vice president Marcia Appel said Friday.
"It'll be a more normal store closing profile for us, which
traditionally has run between 30 and 40 stores a year," she
said in a telephone interview.
As of December 31, 1997, the Minneapolis-based music,
apparel and video game retailer operated 1,363 stores in the
United States, United Kingdom, Puerto Rico and Virgin Islands.
Appel, who runs the company's corporate advertising,
partnership marketing and communications departments, said
Musicland plans to spend around $20 million this year to update
existing stores.
"We'll be spending about $20 million in capital," she
explained. "The great majority of which is going to go to
update, remodel and refurbish our existing store base."
On Thursday, Musicland reported fourth quarter net profit
of $1.89 per diluted share compared with a loss of $2.77 per
diluted share in the year-ago period.
It said fourth quarter sales were driven by strong music
sales and solid gains in apparel, digital video discs (DVD) and
video games.
Company-wide same-store sales rose 5.8 percent in the
fourth quarter of 1997 and Appel characterized January
same-store sales as "good," adding that DVD sales had increased
since Christmas.
"DVD sales since Christmas have gotten even stronger for
us," she said.
She said DVD sales have been running at about 9.0 percent
of the total video category since Christmas.
Overall, the company's financial performance in January has
been "strong," Appel said, adding that the company expects some
slowdown during the Winter Olympics, which open in Nagano,
Japan on February 7 and run for about two weeks.
"All retailers know that the Olympics have a 10-day period
or two-week period when people are not shopping quite as much,"
she said.
As the company recovered its financial footing in 1997, its
liquidity improved, Appel said.
"Liquidity improved to well over $100 million, perhaps as
much as $120 million," she said.
Merrill Lynch analyst Clare Schiedermayer said in a report
she estimates Musicland will generate $99.1 million in cash
flow this year.
"Reflecting the company's success in meeting prior
turnaround objectives, we believe Musicland can sustain the
operating and financial momentum developed in 1997," she said.
For 1998, Musicland will focus on aggressive advertising
and marketing while attempting to maintain gross margins, Appel
said.
Gross margins rose by 2.7 percentage points in the fourth
quarter and 1.2 percentage points over all of 1997.
The company will also look at refinancing its debt
holdings, she said, adding that refinancing will not be
required until September 1999.
At the end of 1997, Musicland had long-term debt of about
$166.4 million, down from $394.5 million at the end of 1996. |
