I spent some time looking over Trans World's Q2 earnings release and the transcript of the earnings call. The documents show a music-based retail chain that is struggling to retool is product mix and store design in a fast-changing market. Music sales continue to fall so fast that other products are not filling in the void.

The company lost $10.1 million on sales of $267.3 million, which was worse than the Q2 2006 loss of $7.7 million on sales of $298. million. In the first half of the year, Trans World has lost $19.1 million on sales of $553.6 million. In the first half of 2006, the company lost $14.8 million on sales of $568.8 million.

• Comp store sales decline 6%. Total sales dropped 10% and Trans World operated 12% fewer stores.
• Comp store music sales declined 19% and represents 43% of total revenues. In Q2 of 2006, music represented 51% of total revenues.
• Comp store sales of electronic, accessories, and boutique increased 16% and represent 13% of total revenues.
• There are a few positives. Gross margin increased to 36.6% from 35.6%. SG&A as a percent of sales declined to 39.5% from 40.2%. Cost of sales dropped to 63.4% from 64.4%.
• Trans World has closed 29 stores to date and has plans to close another 45 to 50 stores by the end of 2007. Right now the company operates 963 stores.
• The 27 remodeled, prototype stores have performed well but more remodels are on hold until after Christmas.

There was no mention of the in-store, mix-and-burn kiosks in the earnings call. In May, president Jim Litwak said the in-store kiosks had given "promising, but still inconclusive results." I had a chance to see one of those kiosks in person a few months ago at a Manhattan f.y.e. store. The kiosk's interface and entire user experience was so poor that I cannot imagine Trans World giving the product a broader roll-out.

Additional reading: Coolfer post on the 2007 Q1 earnings release and call.