Hastings Entertainment has it all for a smaller-town Saturday night. The company operates about 125 superstores in nearly 20 Midwestern and western US states. Hastings' stores and website sell new and used CDs, movies, books, magazines, and video games, in addition to related electronics, such as video game consoles and DVD players. Hastings also rents DVDs and video games. Its store locations average 24,000 sq. ft. and offer such amenities as music listening stations, reading chairs, coffee bars, and children's play areas. Hastings' other store concepts include Sun Adventure Sports, which offers bicycles, skateboards, and other sporting goods, and Tradesmart, a seller of mostly used entertainment products.
Change in Company Type
The company's poor performance and the gloomy outlook for its business have led Hastings to consider going private. In June 2014, a judge lifted a temporary restraining order halting a proposed $21.4 million buyout deal, leaving Hastings free to sell itself to a New Jersey licensing executive. Hastings has scheduled a vote on the going private transaction for July 15, 2014. (Hastings chairman and CEO and other directors and officers of the company control more than 35% of its shares and support its going private.)
Texas-based Hastings' superstores are located in 19 states. About half of the stores are in Texas, New Mexico, Oklahoma, and Idaho. Sun Adventure Sports stores are located in Amarillo, and Lubbock, Texas. The company operates a single Tradesmart store in Littleton, Colorado.
Sales and Marketing
The ailing retailer reported advertising expenses (net of reimbursement allowances from vendors) of $4.4 million in fiscal 2014 (ended January), compared with $6 million and $7.2 million in fiscal 2013 and 2012, respectively.
Hastings Entertainment's fiscal 2014 (ended January) sales declined 6% versus the prior year, to $436 million, and the company was unprofitable for the third consecutive year. Indeed, the chain's sales and profits have been trending downward for years due to falling demand for its products and rentals amid the weak economy and the migration of consumers to digital content consumption. Also, Hastings has closed about 20 stores over the past three years, reducing its store count from 140 locations to 127 at the end of fiscal 2014.
In fiscal 2014 merchandise sales declined 5%, while rental revenue fell 11%. As is the case throughout most of the music industry, Hastings' music sales have been eroded because of the popularity of downloads. Hastings' video rental business also faces increasing competition from the likes of Netflix, which offers online streaming alongside its DVD-by-mail operation; Amazon.com, which provides video-on-demand service; and Redbox's automated $1 rentals. Hastings has yet to see a boost in sales from the demise of Movie Gallery and Blockbuster's bankruptcy.
Hastings targets traditionally underserved mid-sized markets where "there's nothing to do" is more than just a clichéd teenage lament. Stores are generally located in towns with populations of less than 250,000, such as Prescott, Arizona, and Wichita Falls, Texas.
In a bid to pump up its sales and earnings, Hastings is experimenting with two other store concepts. The retailer extended its reach to sporting goods in 2010 with the opening the Sun Adventure Sports concept store in Amarillo, Texas. (It has since added two more.) The 10,000-sq.-ft. concept stores promote physical fitness by featuring more than 300 models of bicycles, devoted areas for running and triathlon accouterments, and a sizable skate shop. The stores also sells nutritional products, fitness books and DVDs, and iPods, and offer daytime spin classes and bike repair services. Hastings is hoping to gain traction with health-minded consumers as sporting goods retailing has fared better compared to entertainment retailing of late.
A single Tradesmart store sells used, as well as some new, books, CDs, DVDs, Blue-rays, and video games systems, as well as skateboards and paintball merchandise. It seeks to appeal to the thrifty and environmentally conscious with mostly used merchandise. Customers can also sell used merchandise for cash or store credit.