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Rex Reports Flat Sales, Lower Net In Fiscal Q2

8/30/2006 10:43:00 AM Eastern

Dayton, Ohio — Rex Stores reported flat net sales and lower net income for its fiscal second quarter ended July 31.

Net sales in the fiscal 2006 second quarter were $82.1 million compared with $82.5 million for the same period last year. Comp-store sales for the quarter rose 3.5 percent vs. last year’s second quarter. Rex Stores said it considers a store to be comparable after it has been open six full fiscal quarters and that comp-store sales figures do not include sales of extended service contracts.

Net income in its fiscal second quarter was $1.5 million compared to net income of $8.7 million from last year at that time.

In an analyst conference call today Stewart Rose, chairman/CEO, noted that margins decreased slightly but that was offset by its ability to control expenses. He said that the retail has hit a “tough patch” with the biggest downturn in “DVD, with product saturation and continued price cutting in the category making it less and less viable for our type of retailer.” Tube and traditional rear-projection TV sales were down with “few 35-, 36-inch sets being available,” Rose said.

He noted that Rex is trying to replace tube and rear-projection TV with HDTV sales across the board with “plasma sales being up over 100 percent and LCD being up 50 percent during the quarter. For our markets as our prices come down we expect our customers to buy and we should expect a boom.”

Rose said that Rex currently has enough brand selection and specific SKUs in HDTV “except for low-end LCD TVs.”

In major appliances Rose reported that sales were up due to hot weather with air conditioner sales matching the chain’s comp store sales gain for the quarter of 3.5 percent.

For its fiscal second quarter income from synthetic fuel limited partnership investments was $700,000 compared with $10.4 million in the comparable year-ago period. Also during the quarter Rex recorded a $1.7 million pre-tax gain from the sale of real estate.

Net income in the six-month period ended July 31 was $3 million compared with net income of $14.8 million for last year’s first half. Net sales in the 2006 six-month period were $167.8 million compared to $169.9 million in the six months ended July 31, 2005. Comparable store sales in the first six months of fiscal 2006 rose 2 percent compared to the same year-ago period.

Rex Stores operates 210 retail stores in 36 states and over the past eight years has also been active in several synthetic fuel investments and has agreements to invest in four proposed ethanol producing plants.

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