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"In what continues to be a challenging retail environment in music and rental, we were able to improve pre-tax profits by $3.7 million from the third quarter of last year."
—-John Marmaduke, Hastings Entertainment CEO
MUSIC RETAIL CONTINUES DECLINE
Borders, Hastings Q3 Reports Show CD Sales in a Tailspin
Music retail continued its decline, though someone did eke out a profit, thanks to diversification.

Borders Group reported steep dips in music sales in Q3, though it did show gains in its core books category, as well as its café, gifts and stationary divisions. 

The company experienced a U.S.-based, same-store drop of 13.1% within music, while broader sales moved upward 5.6% to $615.8 million, and global sales from continuing operations increased 5.3% to $805.2 million.

Borders reported massive net losses of $161.1 million, or $2.74 per share, a massive rise from year-ago losses of $39.1 million.  A bulk of the losses ($119.4 million) came from the divestiture of its stores in the U.K., which accounted for most of the year-to-year delta. 

Meanwhile, Hastings Entertainment posted a narrow Q3 profit, the result of improved cost controls, better product margins and, of course, continued diversification away from music. 

Overall, the company managed a slim $0.1 million profit on revenues of $122.3 million, a reversal of year-ago losses of $2.2 million.  The outcome represents the first time Hastings has scored a profit during its fiscal third quarter, which ended Oct. 31, according to CEO John Marmaduke.  "In what continues to be a challenging retail environment in music and rental, we were able to improve pre-tax profits by $3.7 million from the third quarter of last year,” he pointed out.

Still, music sales dropped 14.8%, from last year’s dip of 6.3%.  By comparison, games jumped a sizable 34.1%, consumer electronics elevated 30.8%, and movies improved 7.6%. 

Retailers like Trans World Entertainment have tried similar strategies, with mixed results, as retailers look to stronger holiday traffic to bolster Q4 bottom lines and help counteract the CD sales downturn.

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