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Cobra Sales Drop, Net Slides

7/28/2003 10:35:00 AM Eastern

Chicago - A tough retail setting and hard-nosed competition knocked sales at Cobra Electronics down 26 percent in the second quarter, to $26.6 million, from $36.3 million.

The mobile communications maker posted second quarter net income of $407,000, a decrease from the $621,000 reported in the same three months in 2002.

'Cobra's decline in sales reflects a continued difficult retail environment, as well as intensified competition in the two-way radio market,' said Jim Bazet, president/CEO.

'As we projected last quarter retailers continue to be reluctant to build inventories in this uncertain economic climate and are seeking low price-point alternatives to drive store traffic. Additionally, more than one-third of the decline in comparable store sales represents revenues from two accounts with which Cobra is not doing business this year for either credit or profitability reasons,' said Bazet.

Gross margin in the second quarter, ended June 30, jumped 370 basis points, reaching 29.1 percent, compared with 25.4 percent in the year-ago period. This was due to better inventory management and favorable currency movements in Europe, said Cobra.

Selling, general and administrative expenses also reached the plus side, declining more than 12.9 percent second quarter over second quarter, due to a drop in the variable selling expenses associated with the decline in sales and an aggressive cost containment program to limit fixed expenses.

In the first six months, Cobra sales decreased about 17 percent, to $47.2 million, down from $57.3 million year-on-year. The company reported a six-month net loss of $46,000, compared with net income of $385,000 in the same period in 2002.

Looking ahead to the third quarter and 12 months, Cobra foresees a difficult retail climate for the balance of the year, both in the retail and distributor channels. 'Moreover, competitive pressures will continue to increase as retailers push their margin requirements and inventory burdens back to manufacturers,' using increased competition for shelf space and key promotions,' said Bazet.

'Because of this, we expect third-quarter sales and net income to be down from one year ago. For the full year, we anticipate that sales will decline, but that continued cost containment will permit Cobra to generate net income in excess of 2002 levels,' he said.

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