Rex Stores, the multi-regional white- and brown-goods chain with investments in ethanol production, reported higher net income but slightly lower net sales and revenue for its fiscal third quarter, ended Oct. 31. Net income in the fiscal third quarter was $14.7 million vs. net income of $4.8 million for the same time last year.
Income from continuing operations, net of taxes was $11.7 million, compared with income from continuing operations, net of taxes of $3.8 million in the same period a year ago.
Despite a reduction in retail assets and investment during the quarter, including the closing of 18 stores, earnings from that side of the business reached $2.2 million, up from $400,000 during the year-ago period.
Net sales in the quarter were $58.8 million compared with $61.1 million in the previous year. Comp-store sales for the quarter declined 8 percent, although margins were up slightly thanks to sales of extended service contracts.
The company reports sales performance quarterly and considers a store to be comparable after it has been open six full fiscal quarters. Comp-store sales figures do not include sales of extended warranties.
In a conference call, chairman/CEO Stuart Rose attributed the same store sales declines to a 50 percent drop in comps for both tube TVs and DLP rear projection sets, and a 20 percent decline in plasma comps due to "drastic price drops" in that category. The declines could not be offset by a 60 percent increase in LCD TV comps, leaving the overall TV category down for the quarter.
Comps improved considerably in November thanks to a boost from Thanksgiving sales. Rose said Black Friday was not as promotional as last year, nor was the toll on margins.
He said that closing unprofitable stores contributed to a return on investment in retail that "we feel good about for the first time in a long while."
As previously disclosed, during the fiscal 2007 third quarter, Rex received 3,693,858 shares of US BioEnergy common stock and approximately $4.8 million of cash as total consideration for its interest in Millennium Ethanol, LLC (acquired by US BioEnergy), based upon the conversion of Rex's $14 Million Convertible Secured Promissory Note, accrued interest and exercise of its Related Purchase Rights.
Rex has interests in ethanol entities and has been active in synthetic fuel investments. — Additional reporting by Alan Wolf