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Rex Stores Q1 Sales Drop 7.6%, But Net Income Rose $4.1 Million

6/07/2004 02:00:00 AM Eastern

Sales at retailer Rex Stores fell 7.6 percent in its first fiscal quarter, dropping to $88.2 million from $95.2 million in the year-ago period. Comp-store sales during the first three months decreased 7 percent.

However, first quarter net income climbed 30 percent, reaching $4.1 million. Much of this increase was due to a 71 percent rise in income from synthetic fuel investments, which came in at $5.2 million in the current fiscal quarter, compared with $3.1 million year-on-year. The first fiscal quarter last year included a gain of $386,000 on the sale of real estate.

During the first quarter, ended April 30, the Rex board extended a previous share repurchase authorization by an additional one million shares. In the first quarter, the retailer purchased about 50,000 shares of its common stock in the open market. The company has about 1.1 million shares remaining available to purchase under the expanded February 2004 stock buy-back authorization.

In a conference call, chairman Stuart Rose attributed the quarter's comp sale declines to a slowdown in key product categories including DVD players and VCRs, describing the latter as having "almost become a non-product."

He also cited continuing shortages of flat panel rear-projection TVs, specifically LCD sets from Sony.

Rose noted that the current quarter's success should depend on sell-through of room air conditioners. A/C sales are "way up" this year compared to last, he said, and stressed that the category will "make us or break us this quarter. We have great buys on air conditioners. It's just a matter of how many we can sell through."

Looking ahead, Rose said supplies of microdisplay TVs are "loosening up," and may even go into an "oversupply situation, which we perform best in." That, plus an infusion of competitively priced plasma displays, which Rex is currently negotiating, "could turn around our same-store sales," he said.

Rose added that the company will close five of its 248 stores and relocate seven units after their leases expire on Aug. 31.

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