Entertainment retailer Trans World reported Q1 2007 earnings today (read press release). Total sales dropped 1% to $286.3 million and net loss increased to $9.1 million from $7.1 million last year. Comp store sales dropped 10%. Said chairman and CEO Robert J. Higgins, "Our first quarter sales remained difficult, while positive comparable store sales in DVD, electronics, accessories and boutique could not offset worsening music results."

Improved margins on music and movies resulted in improved gross margin (36.5% versus 34.8%), but sales of both were down. Music was way down and other segments are being given more emphasis to make up for the decline.

A transcript of this morning's conference call offers some insight into the company's results and strategy.

• Music sales were down 21% on a comp basis, and the company's top 50 experienced a 32% drop on a comp basis. Music represents 44% of sales, down from 52% last year.
• DVD sales dipped 6% on a comp basis and now represent 38% of total sales, up from 31% last year.
• Games dropped 12% on a comp basis and represent 7% of sales, the same as last year.
• The company has expanded space for DVDs, electronics, accessories, boutique and games. It has implemented measures aimed at improving customer service.
• The in-store, mix-and-burn digital kiosk testing has offered "promising, but still inconclusive results." Said president Jim Litwak, "...we want to have the stores increase where they are at right now by about 25 to 30% what they are burning currently."
• The re-branding of f.y.e. stores is on schedule and will be completed in Q2.

A few analyst noted that executive compensation seemed high relative to company performance. The message was pretty clear: Investors want to see the executive team lead by example and keep costs down.

Trans World operates almost 972 retail stores under the names f.y.e., Coconuts Music and Movies, Strawberries Music, Wherehouse, Sam Goody and Spec’s.