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Harvey Fiscal Q3 Loss Widens, Sales Rise 11%

9/18/2001 11:21:00 AM Eastern

Lyndhurst, N.J. - An increase in costs and expenses, as well as a slight reduction in gross profit margin, negatively affected fiscal third-quarter and nine-month earnings at Harvey Electronics.

Harvey reported a net loss of $421,758 for the three months ended July 28, compared with net income of $14,540 in the same period last year.

For the nine months, Harvey recorded a net loss of $246,589, compared with a net profit of $677,192 in the same months in 2000.

Net sales in the third quarter reached $8.8 million, up 11.4 percent from the $7.9 million reported in the year-ago three months. Net sales for the nine months rose 12 percent to $29.5 million, compared with $26.4 million in the same nine months last year. The slowing economy did affect third-quarter sales, said Harvey, especially in July.

Comp-store sales in the third quarter declined 1.5 percent, while comp-store sales for the nine months climbed 5.9 percent.

Gross margin for the third quarter was 38.1 percent, 160 basis points below the 39.7 percent reported in the same quarter last year. The decrease in gross profit margin, according to Harvey, was due primarily to the increased sales of new digital video products, which is driving the retailer's overall business. However, video products typically have lower gross margins than audio.

Gross margin for the nine months hit 38.8 percent, 80 basis points below the 39.6 percent reported in the same nine months in 2000.

Harvey said its net loss for the third quarter included about $100,000 in operating losses from its new Bang & Olufsen store and website, which was offset by modest profitability from the retailer's new Eatontown, N.J. store. The net loss for the nine months includes about $520,000 in operating losses and pre-opening expenses relating to new stores and the company's new website.

'While customer traffic has slowed at all retail locations, we continue to see an increase in average sales ticket and a significant increase in our profitable custom installation services,' said Franklin Karp, president.

'Sales and custom installations of new digital televisions as well as LCD and plasma flat-screen televisions, home theaters and multi-room distribution of audio and video have continued to drive and differentiate Harvey's business,' Karp said.

For the third quarter, video sales accounted for 36.1 percent of net sales, compared with 32.7 percent in the year-ago period. For the nine months, video sales accounted for 35 percent of net sales, compared with 30.5 percent in the same nine months last year.