Consumer electronics retailer Ultimate Electronics, Inc. reported its operating results for the third quarter and 9 months ended Oct. 31, 2004.
For the third quarter ended Oct. 31, 2004, the company reported a net loss of U.S. $6.5 million ($0.43 per share), compared to a net loss of $6.2 million ($0.42 per share) for the same quarter of the prior year. Loss from operations was $5.5 million compared to a loss from operations of $9.9 million for the same quarter of the prior year.
Sales were $157.2 million, down 1.6 percent from the prior year. Comparable store sales were down 8 percent for the quarter. Gross profit margin was 34.8 percent, up 160 basis points from a year ago. Selling, general, and administrative (SG &A) expenses improved as a percentage of sales to 38.3 percent from 39.4 percent for the same quarter of the prior year.
During the quarter, sales decreased due to traffic declines driven by residual impacts from last year and shifting competitive pressures, the retailer said. Sales were favorably impacted by the improvement in the company's conversion rate of store traffic to sales, which the company believes resulted from its more focused marketing strategy. Gross profit margin improved due to continued focus on merchandise selection, inventory management, and store level execution, the retailer said, adding that SG &A expenses improved primarily as a result of reduced advertising and selling expenses.
"The $4.4 million improvement in our third-quarter loss from operations indicates that our turnaround initiatives are taking effect," Dave Workman, president and CEO said in a statement. "Our gross profit margin, comparative store sales metrics. and SG&A expenses have improved each quarter since implementing our turnaround strategy. The results reflect our focused initiatives on increasing gross margin, managing inventory, improving advertising effectiveness, reducing SG&A, and enhancing the customer experience with Ultimate Electronics. We remain committed to our turnaround strategy and expect to see continued improvement in our business. Our actions position us well for the holiday season, and as we enter 2005."
For the 9 months ended Oct. 31, 2004, the company reported a net loss of $31.1 million ($2.09 per share), compared to a net loss of $9.5 million ($0.65 per share) for the same period of the prior year. Loss from operations was $27.2 million compared to a loss from operations of $15.1 million for the same period of the prior year.
Sales were $462.5 million, down 1.5 percent from the prior year. Comparable store sales were down 9 percent. Gross profit margin was 33.0 percent, compared to 33.2 percent for the same period in the prior year.
SG &A expenses increased as a percentage of sales to 38.9 percent from 36.4 percent for the same period of the prior year. The company said the increase primarily reflects the impact of higher rent and depreciation expense for stores opened in the third quarter of fiscal 2004 and an impairment charge taken in the second quarter of fiscal 2005, partially offset by a reduction in advertising and selling expenses.
The retailer said results for 2005 were also negatively impacted by a non-cash reversal of an income tax benefit of $1.7 million. The company believes that under the guidance provided by FAS 109, the reversal of the income tax benefit more appropriately represents the company's tax position.
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