Consumer electronics retailer Tweeter Home Entertainment Group, Inc. (Canton, MA, U.S.) has announced its earnings results for the first fiscal quarter ended Dec. 31, 2003.
Total revenue increased 2 percent to U.S $255 million from $250 million in the same period last year, while comparable store sales decreased 1 percent. Net income for the quarter was $5.1 million, compared to $5.2 million last year. Earnings per share were $0.21, compared to earnings per share of $0.22 last year.
Income from operations was $8.7 million, compared to $9.0 million last year. As a percentage of revenue, the operating income was 3.4 percent compared to operating income of 3.6 percent last year. This was primarily due to a 100-basis point decrease in gross margin, a 90-basis point decrease in selling expenses and a 10-basis point increase in corporate expenses, according to the companies. (The comparisons in this earning statement relating to cost of sales and selling expenses are before the effect of the EITF 02-16 reclassification.)
Tweeter attributes the decline in gross margin to a change in mix that includes greater sales of video products and lower sales of audio products, which is a continuation of a several quarter trend. The decrease in selling expenses as a percent of sales is primarily the result of a 30-basis point decline in bank service charges, a 30-basis point decrease in store level payroll, attributable to the change in product mix, and a 20-basis point decrease in gross advertising.
The $513,000 increase in corporate expenses is mainly attributable to increased consulting and professional services fees. Offsetting this was a reduction in compensation expense, both in dollars and as a percent of revenue.
Jeffrey Stone, president and CEO of Tweeter, said that the company had hoped for a better overall comp performance in the quarter, but after seeing all the comp store consumer electronics (CE) reports for the month of December, he said he feels the company faired well compared to the industry.
"All forms of new technology television are driving top line sales including Plasma, LCD, and DLP technologies," Mr. Stone said in a written statement. "Flat-panel sales (Plasma, LCD) accounted for 19 percent of the quarter's revenue while DLP accounted for 8 percent of revenue."
Tweeter CFO Joe McGuire added, "We are very pleased with our progress managing expenses. On a negative comp we were able to leverage selling expenses year-over-year. On corporate expenses, the gross shows a 10-basis point increase, but 30-basis points of the increase are directly related to consulting fees. Absent those consulting expenses, our corporate line would have delivered 20 basis points of leverage as well."
Mr. McGuire said he is also pleased with the progress being made on the company's supply chain and inventory management initiatives. "Net inventory finished for the quarter at $146 million, compared to the year earlier inventory ending level of $162 million," he said. "Our expectation is that supply chain initiatives, a key corporate program for fiscal 2004, will continue to improve our cash conversion cycle."
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