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"Healthy gains in VHS, DVD, books and electronics mostly offset the continued weak summer music release schedule. We are looking forward to the music and video releases that will begin to hit shelves in September."
—Musicland's Keith Benson

THE LONG, COLD SUMMER
AT MUSIC RETAIL

Musicland, Hastings Bigwigs Blame
Sales Drop On Crappy Music
Musicland Stores Corporation is reporting a 1.7% drop in comparable-store sales for the month of August. Hastings Entertainment reported flat comp store results for their second fiscal quarter; and even though Best Buy reported an increase of 7.2% in comp-store results, they pointed to consumer electronics rather than their music division as the reason for the bump. In other words, it's been a long, tepid summer of new releases, and retail results are showing signs of fatigue.

Sales for Musicland's Mall Stores Division (Sam Goody and Suncoast) decreased 1%, while the Superstores Division (Media Play and On Cue) dropped 3.2%.

The company's total sales decreased to $122.6 million, compared to $122.7 million for the same four-week period in 1999. Total Superstore sales climbed 4.7% to $43.6 million, compared to $41.6 million last year. Total Mall sales fell 2.4% to $79.0 million from $81.0 million a year ago.

So far this year, Musicland's comparable-store sales are up 2.3%, while total sales climbed 3.4% to $1.06 billion from $1.03 billion in the same period last year.

Said Vice Chairman and CEO Keith A. Benson: "Healthy gains in VHS, DVD, books and electronics mostly offset the continued weak summer music release schedule. We are looking forward to the quickly approaching holiday season and the music and video releases that will begin to hit shelves in September, including an album from Madonna, 98 Degrees and the release of ‘Men in Black' on DVD. I just can't get enough of that zany Will Smith."

Hastings saw a net loss of $2.3 million, as opposed to a profit of $862,000 for the same period last year, even though their total revenues rose 4.6% to $107.1 million. Besides the flat comp-store sales, Hastings also pointed to an adjustment of $2.7 million (as a pre-tax non-recurring charge) relating to accounting errors revealed earlier this year. Hastings Chairman/CEO John Marmaduke is focusing on the positive: "Revenue growth for the second quarter was essentially in line with management expectations, since we are comparing against a strong quarter last year."

Best Buy reported record sales for the second fiscal quarter of $3.168 billion, an 18% increase compared to the same period last year. But as we said earlier, no one is pointing to music as the catalyst. Here's Best Buy's CFO Allen Lenzmeier: "Comparable store sales were in line with company expectations." But to what does he attribute the increase? "The momentum behind the digital product cycle continues to accelerates sales of digital cameras, camcorders, cellular communication, DVD hardware and software continued their significant sales gains." Yo, dude, where's the music? "Television sales continued strong this quarter, bolstered by increased assortment and affordability for both digital and analog products." Right.

September will bring some relief, with enough big releases to kick these anemic numbers up a notch or three. This summer's release schedule has been described by many as one of the worst in memory—it can only get better from here.

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