Entertainment retailer Trans World posted a net loss of $14.3 million in the third quarter of 2007. Revenues dropped 12% to $260.6 million from $297.7 million last year. The company operated 13% fewer stores during the quarter, and same store sales were down 4% year over year.

Said Robert Higgins, chairman and CEO, in the press release, "We continued to achieve positive comparable store sales in home video, video games, electronics and boutique during the third quarter, however, these results did not offset the decline in music."

During the conference call (read transcript), president and COO Jim Litwak revealed that same store music sales had declined by 21% (same as the Q1 decline, see below) and that music had comprised 40% of total revenues for the quarter (versus 48% last year). Video game sales increased 29% on a comp basis while home video increased 8%.

Trans World's problems mirror those of the music industry, to which it has tied a great deal of its fortunes over the years. As record labels try to offset the slide of the CD with other revenues, Trans World is shifting its focus to other products and away from the CD. The company's transformation is painful, but at least there are other physical formats to replace the CD.

Earlier this month came news that Trans World had received a buyout offer from its CEO, the company's largest shareholder. The $5 per share offer represented a 29% premium over the price at the time. Trans World closed today at $5.19. Said Sherwood Investments' Julian M. Benscher of that offer, "We are highly confident that an auction of the company would result in a sale in excess of $8 per share." Sherwood owns about 4.3% of Trans World's shares. The market obviously has its doubts that a bid of $8 per share is forthcoming. Some may want to take a lower amount and run. The proper restructuring of Trans World will be a process better suited for the long-term outlook and intestinal fortitude of private ownership.

Previously: Trans World's Q1 2007 earnings was a $9.1 million loss. "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."