Rex's Q1 Profits Plunge 80%

By Alan Wolf -- TWICE, 6/5/2008

UPDATE! Dayton, Ohio — Rex Stores reported an 80 percent drop in fiscal first-quarter net income to $1.5 million, which it attributed in part to the consolidation of two of its ethanol-production investments.

Net sales and revenue slipped 3.7 percent to $47.1 million for the four months, ended April 30, and same-store sales were essentially flat, falling 0.3 percent.

During a conference call, Rex chairman/CEO Stuart Rose said earnings from retail operations, excluding sales of extended warranties, fell nearly 53 percent year over year to $900,000, as the company cut margins on premium products to maintain traffic amid the soft economy.

Rose said business also suffered from a dearth of opportunistic buys on manufacturer closeout items and flat-panel overstock, as vendors improved their inventory management.

On the product front, comp sales of major appliances fell 0.4 percent during the quarter; audio declined 1.2 percent; video increased 0.8 percent; and TV grew 2.2 percent.

Within the latter, plasma was up 15 percent in comps; rear-projection TV fell 54.5 percent, and sales of analog TV dropped from “a couple of million” last year to zero, Rose said. Comp sales of LCD panels 48 inches and larger grew 128 percent while comps of 43- to 47-inch panels grew 64 percent. Declines in sales of smaller screen sizes — including a 60 percent dip in 13- to 15-inch LCD TVs — were attributable to a flood of low-priced product and competition from national discount chains, he said.

In contrast, comp-store sales in May were up 2 percent (excluding room air), Rose said, thanks in part to stimulus-check spending. He added that the coming digital broadcast transition should further aid CE sales.

Rex also announced that it will consider “strategic alternatives” to its retail operation, including opportunities to “monetize its real estate portfolio.”

Besides the retail chain, the company holds partial ownership positions in four ethanol affiliates that are either in production or will go online within the next year.