Hastings Entertainment has it all for a smaller-town Saturday night. The company operates about 135 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.
Hastings' superstores are located in 19 states. About 45% of the superstores are in Texas, Oklahoma, and New Mexico. Sun Adventure Sports stores are located in Amarillo, and Lubbock, Texas. The company operates a single Tradesmart store in Littleton, Colorado.
Hastings Entertainment's fiscal 2012 (ends January) sales declined nearly 5% vs. the prior year, while net income fell 17% over the same period. Sales and profits have been trending downward for years due to falling demand for Hastings' products and rentals amid the weak economy. The smaller store base also pinched sales. Indeed, in fiscal 2012 the retailer's sales dipped below $500 million, for the first time in almost a decade, and the company was unprofitable.
The sale and rental of videos and video games generate about 50% of the company's revenue, while book and music sales pull in about 22% and 12%, respectively. 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 may see a boost in the long term from the recent demise of Movie Gallery and Blockbuster's bankruptcy, however.
As a result of the weak business environment, Hastings will close three stores in fiscal 2013 (ends January), and will review the profitability trends and prospects of existing stores, with further closures or relocations in mind for underperforming locations.
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. Although the retailer has aimed to add two to three stores a year in its target markets, its store count has fallen due to decreased demand.
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.
The founding Marmaduke family, including CEO John Marmaduke, run the company. CEO John and his brother, director Stephen Marmaduke, together control more than 40% of the company's shares. Investment firm Dimensional Fund Advisors owns about 10%. – less