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Harvey Reports Sales Drop, Net Loss For Year

2/13/2006 02:00:00 AM Eastern

Custom CE installer and high-end retail specialist Harvey Electronics reported a drop in both fiscal year-end sales and revenue.

For the 12 months, ended Oct. 29, Harvey sales dropped 6.3 percent to $40.4 million, from $43.1 million the previous year. Comp-store sale declined 8 percent.

The regional nine-store chain, operating in the New York area, reported sales of $9.6 million for the three months, ended Oct. 29, down 7.2 percent from the $10.4 million recorded in the same period in 2004. Comps-store sales in the quarter declined 12.6 percent.

A brief look at its holiday quarter, including the months of November through January 2006, Harvey said it continues to see a slowdown in retail store traffic. Custom installation continues to be strong and the video business has improved, said the retailer, with unit sales increasing, offsetting additional price compression.

However, Harvey expects to see a decline in its audio business and an overall reduction in comp-store sales of between 9 percent and 10 percent in the first quarter, compared with the same three months the prior year.

Harvey, which reported its year-end financials on Jan. 27, about three months after the end of the reporting period, said it had a net loss of $830,343 for the 2005 fiscal year, compared with net income of $1.3 million the previous year. The loss was negatively impacted by reduced comp-store sales, $200,000 in pre-opening expenses for the new Bridgewater, N.J. store and a 54.3 percent increase in net advertising expenses.

In the three months, net loss was $284,459, compared with net income of $748,242 in the fourth quarter of 2004. Net income in the fourth quarter of 2004 was positively impacted by an income tax benefit of $977,000.

Gross profit margin for the 12 months increased to 41.7 percent, from 41.1 percent the prior year, due to a decline in the retailer's overall video business, which generally has lower margins than audio and labor sales. This was offset by higher margin audio sales and additional labor income, wire and cable sales, which generate strong gross margins. For the quarter, gross profit margin improved to 41.4 percent from a year-ago 40.9 percent.

Although Harvey said it was encouraged by the continued growth of its custom installation segment — which accounted for 64 percent of net sales in the fiscal year ended last October, compared with 59 percent the prior year — its business was negatively impacted by a decline in retail store traffic and from reduced overall video sales.

Video business was off about 15 percent for the year, due to reduced CRT, DLP and DVD sales, as well as price compression, competition, key vendor product shortages and a 1 percent decline in flat-panel unit sales, said Harvey.

“We believe the slowdown was due to a deceleration of consumer spending as well as consumer fears that flat-panel television prices would continue to significantly decline, thus delaying the purchase decision,” said Franklin Karp, president/CEO.

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