Tweeter Home Entertainment Group moved into the red in its fiscal second quarter, reporting a net loss of $2.5 million, compared with income of $2.6 million in the year-ago period.
Loss from operations in the second quarter, ended March 31, came in at $3.3 million, compared with income from operations of $4.9 million in the same period last year.
Tweeter said operating income decreased to a negative 1.8 percent, as a percentage of revenue, compared with 2.6 percent in the same three months a year earlier. This was due to a 400-basis-point increase in selling expenses, as well as a 20-basis-point drop in gross margin from 35.7 percent, to 35.5 percent.
"Our biggest issue continued to be store traffic in the March quarter," said president/CEO Jeff Stone. "We remain focused on taking costs out of the business through improvements in process and systems. Our financial models demonstrate solid improvements in profitability as we approach flat comps."
Last month, Tweeter announced sales for the second fiscal quarter. (See TWICE, April 21, p. 1.) Revenue at Tweeter was down 2.1 percent, to $182 million, from $185.8 million in the year-ago period. Comp-store sales slid 12 percent, excluding January and February sales for the Hillcrest chain acquired on March 1, 2002.
Tweeter places the video category at 52 percent of its sales. In flat-panel television, an $11 million pick-up in second quarter revenue was negated somewhat by the loss of $7.6 million in tube sets, said Tweeter. Flat-panel currently accounts for about 12 percent of overall revenue.
Inventory at the end of the second quarter was $144 million, down from $162 million at the end of the first fiscal three months. This compares favorably to last year, when Tweeter had $155 million in inventory, with 19 fewer stores. Tweeter opened 12 new stores in the past six months, with none on board for the remainder of the year.
In the six months, Tweeter revenue dropped to $431.6 million, compared with $437.7 the previous year. Net income came in at $2.7 million for the six months, down from $16.1 million year over year. Operating income was $5.8 million for the period, compared with $27.9 million in the same six months a year ago.