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Harvey Q2 Sales Rise, But Still Suffers Loss

6/15/2001 03:20:00 PM Eastern

Lyndhurst, N.J. -Harvey Electronics reported a 6.6 percent increase in sales for its fiscal second quarter specialty retailer reached $9.1 million in sales, up from $8.6 million, but still posted a $147,430 loss.

The sales boom was driven by continued consumer demand for new technologies - such as high- definition TV, DVD, DSS, plasma flat-screen TV, home theater and custom installation for these products.

Comparable-store sales in the second quarter, ended April 28, climbed by about $226,000, or 2.6 percent over the same quarter in 2000.

Harvey, however, recorded a net loss of $147,430 for the second quarter, compared with net income of $222,270 in the same three months last year. The net loss for the second quarter included about $250,000 in operating losses and pre-opening expenses for new stores and a new Web site, said the retailer.

Harvey's expansion plan for fiscal 2001 included the opening of one new Bang & Olufsen store, a new retail showroom and the launch of harveyonline.com.

For the six months, Harvey's net sales climbed 12.3 percent to $20.7 million, up from $18.4 million in the same six months last year.

Comparable-store sales for the six months climbed 9.1 percent, or $1.7 million, from the same period last year.

Net income for the six months hit $175,169, compared with $662,652 in the same period in 2000. This was reduced by about $420,000 in operating losses and pre-opening expenses relating to new stores and the retailer's new Web site, said the company.

'Our six- and three-month comp-store sales for fiscal 2001 continue to increase, despite the slowing economy,' said Franklin Karp, president. 'Our comp-store increases are in contrast with certain competitors who have recently reported negative comp-store sales.'

Karp said Harvey continues to enjoy an increase in average sales ticket, despite a decline in customer traffic, compared with the levels of fiscal 2000.

The chain also has seen a significant increase in custom installation services. 'New digital technologies that we promote and the custom installation of these products continue to drive the business and differentiate our company in the marketplace,' said Karp.

The increased sales of digital video products, which typically have lower margins than audio products, led to slight decreases in gross margins for the second quarter and six months. Harvey reported a gross margin of 39.1 percent in the second three months, 110 basis points below the 40.2 percent for the same quarter in fiscal 2000. Gross margin for the six months was 39 percent, 60 basis points lower than the 39.6 percent reported in the same period last year.

Harvey said that its increased sales of new video products, however, have led to the cultivation of larger projects - including home theater, accessories, furniture and custom installation services.

Selling, general and administrative expenses (SG&A) for the second quarter increased 23 percent, or $703,000 from the same three months last year. For the six months, SG&A increased 24.8 percent, or $1.5 million, compared with the year-ago six months. Costs relating to the new stores and Web site, among other, drove up these figures, said Harvey.

Harvey said it also is in the process of totally renovating its flagship location in Manhattan, which has disrupted business there and negatively affected sales for April and May. The renovation is expected to be completed this summer.

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