Music and electronics retailer Musicland Stores Corporation (MSC) ended 1998 on a high note. The Minnetonka, Minnesota-based parent company of the Suncoast, Sam Goody/Musicland, Media Play and On Cue chains recently released its Q4 and year-end results. Net sales for its four chains grew from US$14 million in 1997 to US$38 million last year, a climb of 172%. Same-store sales increased 6.7% for the same period.
Compared with `97, when shares dropped below US$0.50 and the company was on the verge of filing for bankruptcy protection, MSC’s performance in 1998 represents a major turnaround, says Derek Baine, a senior analyst at Paul Kagan & Associates. Baine credits MSC’s change in fortune to purging itself of unprofitable stores (in 1998, it closed 31), the growth in consumer popularity of DVDs, and a rebound in the sales of pre-recorded music, buoyed largely by the release of the Titanic soundtrack.
Though she acknowledges the role these factors have played, Marcia Appel, VP of advertising and partnership marketing at MSC, says a leaner, meaner inventory system has helped to fatten the company’s bottom line.
‘We’ve gotten much more efficient by moving to a just-in-time inventory method. Consequently, we have less inventory that has to be returned,’ says Appel. She also points to a jump in the sales of video games and trend merchandise, such as movie-related apparel and plush toys, as being major growth areas. Currently, Musicland operates 1,346 stores located in the U.S., Puerto Rico, the Virgin Islands and the U.K.