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Harvey Sales Off 6%

5/17/2005 01:31:00 PM Eastern

Lyndhurst, N.J. — Harvey Electronics sales dropped 6 percent in the retailer’s fiscal second quarter, to $9.7 million, from $10.3 million in the year-ago period.

Franklin Karp, president/CEO, blamed the loss on “a deceleration of consumer spending resulting from uncertainties in the financial markets as well as consumer expectations that flat-panel television prices will continue to decline, thus delaying the purchase decision in this product category.”

Harvey comp-store sales in the second quarter, ended April 30, decreased about $669,000, or 6.5 percent, from the same three months last year. “A decline in comparable store sales during this period has also been reported by other reporting electronics retailers in our industry,” said Karp.

“We expect to report a loss in the second quarter,” continued Karp. “We have responded to this by reducing expenses for the remainder of the year, while maintaining our marketing presence. With the recent rebound in sales and in view of our expense initiatives, coupled with our strong gross profit margin, we remain optimistic about the remainder of the year.”

On the bright side, Karp said Harvey in April began to see a sales volume resurgence. This positive trend continued into the first two weeks of May, and the chain also has seen an increase in comp-store sales.

Unit sales of flat-panel TVs will accelerate in the latter part of the third quarter and the fourth quarter, said Karp, as video prices further compress. Along with increased demand for flat-panel, Karp expects increased sales of audio products, accessories and installation services, which are bundled with sales of video products.

“Demand for our custom installation continues to be strong,” said Karp. “We believe our higher margin custom installation services and related accessories will result in a strong gross product margin for the first six months and second quarter of fiscal 2005.”

Custom installation sales of equipment and labor accounted for over 60 percent of Harvey’s net sales in the first six months, compared with 58 percent in the year-ago period.

For the six months, sales at the high-end retailer and custom installer dropped 4.1 percent, to $21.8 million, down from about $22.7 million in the same time frame the prior year. Comp-store sales for the six months slid just under $1 million, or 4.4 percent, compared with the same period a year ago.

Harvey said the relocation and consolidation of its Bang & Olufsen Greenwich, Conn. store into the Greenwich Harvey location was completed in April. The chain expects to open its new Harvey retail showroom in Bridgewater, N.J. in June.