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Tweeter Fiscal Q2 Revenue Rises 58%

4/25/2002 09:37:00 AM Eastern

CANTON, MASS. - Faced with a challenging quarter for sales and one that impacted profitability, Tweeter Home Entertainment Group reported a 57.7 percent increase in revenue for its second fiscal quarter, to $185.8 million, up from $117.8 million in the year-ago period.

However, the retailer recorded a 31.5 percent drop in net income for the three months, to $2.6 million, down from $3.8 million in the same quarter last year.

Comp-store sales decreased 6.7 percent in the second quarter, ended March 31 - excluding the Big Screen City, Audio Video Systems, Sound Advice, Showcase Home Entertainment and Hillcrest chains.

"The quarter certainly was a challenging one from a sales perspective and that obviously impacted our profitability. We have moved on and are focused on the current quarter," said Jeffrey Stone, president/CEO.

"We are amazed at the sell-through of flat panel television," Stone said. "The category represented approximately 7 percent of our business in March and is running at about the same level in April. Our customer made the transition from analog to digital very quickly and it appears that they are making the transition from tube and projection television to flat panel even quicker."

Tweeter income from operations in the second quarter decreased 14.8 percent, to $4.9 million, down from $5.7 million, compared with the second three months last year.

Overall gross margin declined 60 basis points to 35.7 percent in the second quarter, year over year, mainly because of a reduction in purchase rebates.

Selling, general and administrative expenses grew 160 basis points in the period, compared with the same quarter a year ago, primarily driven by declines in comp-store sales and increases in fixed costs as a percentage of sales.

For the first six months, Tweeter sales rose to $437.7 million, compared with $279.8 million the previous year. Net income was up 18.5 percent in the six months, to $16.1 million, from $13.6 million in the year-ago period. Income from operations increased 31.4 percent for the six months, reaching $27.9 million, compared with $21.2 million year over year.

Looking ahead, Tweeter has revised its internal expectations for its third fiscal quarter, ending June 30, due to uncertain economic conditions. The retailer is planning for a comp-store decline of between 3 percent and 5 percent, with revenue anticipated in the range of $181 million to $184 million.

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