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Good Guys' Q3 Sales Slid 13 Percent

12/19/2002 09:10:00 AM Eastern

San Francisco - Good Guys' net sales fell 13 percent to $172 million in its fiscal third quarter, compared with $198 million in the year-ago period, while same-store sales slid 10 percent.

The company said its net results were impacted in part by the closure of seven stores earlier this year, and that while sales picked up in November, capped by a 'strong' Thanksgiving weekend, the holiday spurt will largely be reflected in December.

Still, Chairman/CEO Ken Weller described the performance of the high-end A/V chain as 'disappointing' during the early part of the quarter, which prompted 'a number of significant changes that have already started to deliver results.'

Among actions taken were the restructuring of the retail team in October and a greater focus on 'quality of sales metrics,' which together have improved the in-store experience, increased average transaction size and gross profit per transaction, and strengthened comp-store sales, Weller said.

Despite the sales decrease, Good Guys reported a narrower net loss in the third quarter, down to $3.7 million, compared with $8.1 million year-on-year. Gross profit margin slid 70 basis points in the third quarter, to 27.6 percent, reflecting the market's aggressive promotional environment and the continuation of the focused sell-through of under-performing and discontinued brands and models through the first part of the quarter.

The retailer did reduce its Selling, General and Administrative Expenses (SG&A) by more than $12 million, or 260 basis points, to 27.6 percent, in the third quarter, ended November 30.

As for product, Good Guys noted that flat panel displays, HDTV, digital cameras and home theater systems and other digital products continued to show strong growth, with sales of plasma and LCD displays up more than 400 percent from the year-ago period. By contrast, sales of audio components, VCRs and other mature technologies continued to decline.

For the nine months, Good Guys recorded a net loss of $10.1 million, which more than halved the net loss of $22.7 million in the same nine months in 2001. Sales dropped to $520.5 million in the period, down from $560.5 million in the same nine months last year. Comp-store sales were off 4 percent.

The retailer reduced SG&A in the nine months by more than $23 million, down 240 basis points, to 28.2 percent. Gross profit margin for the nine months, however, slipped 50 basis points, to 28.3 percent.

Weller said cost-cutting efforts should help Good Guys reach its goal of returning to profitability during its current fiscal year. He added that the holiday selling season is off to a favorable start for the chain, and that both cash availability and in-stock position on key items remains strong.