Harvey Reports Q3 Sales Dip; Switches To PRO Group

Lyndhurst, N.J. — Slower traffic, increased competition and tight supplies of flat panel TVs contributed to a 15.5 percent decline in fiscal third quarter sales at Harvey Electronics, the New York metro area A/V specialty chain.

In addition the retailer reported that it has joined the Progressive Retailers Organization (PRO Group), ending a nine-year affiliation with Home Theater Specialists of America (HTSA).

The retailer reported that same store sales for the three months ended July 29 fell nearly 19 percent.

President/CEO Franklin Karp said he was “very disappointed” with the sales results and “very concerned” that the declines accelerated from the prior two quarters. Comparable store sales were particularly weak at the company's Eatontown, N.J., Greenvale, N.Y., and flagship Manhattan showrooms, and Harvey expects to show an increased loss in operations for the third quarter and nine month periods.

To remedy the situation, Karp is retooling Harvey's advertising efforts “to better reflect current market conditions and customer service demands.” Harvey's marketing message had been inconsistent, he said, and contributed to the traffic and sales slowdown by failing to “cultivate retail traffic while promoting the company's service offerings.”

Not all the news was glum. Harvey's custom installation business continued to grow as a percentage of sales — representing 64 percent of gross sales for the first nine months — and labor revenue rose by nearly 3 percent during the period, which is expected to bolster the company's gross profit margin. Karp is also seeing improving flat panel availability from core vendors, which should benefit Harvey's fourth quarter results, although he anticipates continued price compression within the category.

CFO Joseph Calabrese said the company has about $1.1 million in available bank financing, which should carry it through until a proposed $4 million equity infusion from an investment group led by Trinity Investment Partners is completed in October. The deal, if approved by shareholders, will give Harvey working capital and Trinity control of the chain.

Concerning Harvey switch from the HTSA to the PRO Group Karp, a former HTSA board member, described the switch as “another step in the evolutionary process for Harvey and its dedicated staff.”

He told TWICE, “They're both excellent groups and HTSA was very helpful with our growth. But PRO will help us learn on a different level with a different kind of retailer. There's a lot to be learned from the way those guys go to market.”

Karp said he doesn't anticipate any changes in Harvey's merchandise mix, as the two buying groups share many common lines.

At PRO, Harvey joins fellow New Jersey A/V specialists Sixth Avenue Electronics and Electronics Expo, and brings the group's membership up to 17 dealers.