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Flat-Panel TVs Drive Tweeter Q4 Sales

11/26/2002 08:22:00 AM Eastern

Canton, Mass. - The flat-panel television at Tweeter Home Entertainment Group helped to increase total fiscal fourth quarter revenue by 21.8 percent, to $183 million, up from $150.3 million in the year-ago period, but net profit fell slightly.

Even with average price points of $7,200 for plasma and $1,700 for LCD sets, Tweeter expects the category to be a key component of its holiday sales. The retailer anticipates revenue from these technologies to represent low double digits as a percent of total sales for the first quarter of fiscal 2003..

The specialty retailer of mid- to high-end audio and video products, which had to take an impairment charge to goodwill of $194.9 million in the fourth quarter, ended Sept. 30, posted net income of $516,000 for the period, compared with $847,000 in the fourth quarter of 2001. This excludes the $195 million impairment charge and its related tax benefit of $13 million. Net loss for the quarter, including the impairment charge, was $181.3 million. Comparable-store sales, however, decreased 1.4 percent in the same three months.

'Fiscal 2002 was a difficult year for Tweeter as it was for most retailers,' said Jeffrey Stone, president/CEO. 'Our focus has always been on profitability, and although we would have preferred stronger results, our operating income was 3.8 percent of sales. While this is a strong performance within our industry peer group, we hope to improve upon it in fiscal 2003.'

Boosted by an increase in overall product margins as well as a reduction in inventory shrink, Tweeter reported a 70-basis-point rise in gross margin in the fourth quarter, hitting 35.6 percent, up from 34.9 percent the previous year. However, income from operations in the fourth quarter, excluding the impairment charge, decreased to $1.6 million, down from $2.8 million year-on-year.

For the 12 months, total revenue at Tweeter soared 47.4 percent, hitting $796.1 million, up from $540.1 million in the prior year. Comp-store sales decreased 3.3 percent, excluding acquired chains.

Net income for the year, excluding the impairment charge and related tax benefit, decreased to $16.7 million, down from $16.9 million the previous year. Net loss for the 12 months, including the impairment charge, was $165.1 million.

Tweeter opened six new stores and closed one in the fourth quarter, and plans to open nine new stores in the first quarter of the current fiscal year. It plans to open 16 new stores during fiscal 2003.

Looking ahead to the first quarter of fiscal 2003, ending Dec. 31, Tweeter expects comp-store sales to be between flat and up 1 percent, and as a result is anticipating revenue in the range of $283 million to $292 million.

Given the erratic nature of its sales this past year, Tweeter said - in reporting fourth quarter financials the last week in November - it feels there is a higher than usual degree of risk in forecasting its revenue for the holiday season. The retailer said, although current sales trends appear to be in line with internal expectations, it points out it still has not experienced Thanksgiving weekend sale, nor December business, which is the largest sales month of the year.

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