Trans World, operator of f.y.e. and other entertainment chains, reported dismal earnings in Q4 2008 (read earnings release and earnings call transcript). Total Q4 sales were down 24% to $344.7 million while comp store sales were down 14%. For fiscal 2008, sales were down 21% to $988.0 million while comp store sales were down 11%. (Comp store numbers are much better due to the high number of stores that were closed during the year.) Q4's net loss was $9.4 million and fiscal 2008's net loss was $69.0 million (which includes a $15.1 million impairment of long-lived assets).

Q4 comp store music sales dropped 24%. Fiscal 2008 comp store music sales fell 20% and represented 35% of total revenue (down from 39% the previous year). Music was only 31% of revenue in Q4.

In the earnings call, president and COO Jim Litwak outlined a four-pronged strategy to create "a sustainable model that is less impacted by the technological advances upon new physical product." One aspect of that strategy is improving market shares in CD and DVDs, two categories that "outperformed the industry" in Q4 but are extremely impacted by consumers' transition to digital. Those comments have been made in the past and reiterated the company's desire to be the market leader in the fading CD and DVD businesses -- to be the best in the worse, so to speak. Competition could be sparse, and there should be good opportunities as labels pour margin-enhancing promotional dollars into the few chains that still show support for the CD format.

The downside is that Trans World is doubling down in troubled segments. It did not specify which new business lines it plans to add to bolster growth. Further, it has downgraded the role online and digital kiosks will play in its turnaround.