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Ultimate Reports Q4 Sales Up 13%

3/24/2003 02:00:00 AM Eastern

In a difficult year that saw its television/digital broadcasting systems (DBS) category gain a heftier share of overall business, specialty retailer Ultimate Electronics reported an overall 13 percent fiscal fourth-quarter sales increase on lower earnings and store comparisons.

Sales in the three months, ended Jan. 31, reached $242.5 million, up 13 percent from the $214.7 million recorded in the year-ago period. Fourth quarter net income, however, dropped to $2.5 million, down from $6.8 million, while comp-store sales were 8 percent lower.

In the fourth quarter, a significant sales mix shift found Ultimate's television/DBS category with 43 percent of the overall business, up from a 39 percent share in the fourth quarter of the previous year. Audio, the next largest category, dropped to a 19 percent sales share in the three months, down from 21 percent a year earlier. The video/DVD and home office categories slipped 1 percentage point each, to 17 percent and 3 percent, respectively, while mobile remained firm, at a 6 percent share.

Ultimate's gross profit margin in the fourth quarter decreased 70 basis points, to 29 percent, while selling, general and administrative (SG&A) costs for the quarter soared 270 basis points, to 27.3 percent, due mainly to higher fixed expenses, payroll and advertising costs.

"We have adjusted our growth plan for 2003 to be more conservative because of the current environment," said CEO Ed McEntire, who placed current annual expansion plans at seven new stores and one store relocation. "We are currently implementing a number of initiatives designed to increase margins and reduce our selling, general and administrative expenses."

Ultimate sees its future brightening over the course of the current year, according to Alan Kessock, chief financial officer and senior/VP finance. "February comparable store sales rebounded from the fourth quarter and finished down 2 percent. For fiscal 2004, we plan for comparable store sales to be down in the low single digits for the first half of the year, followed by positive low- single-digit comparable store sales in the third quarter and mid-single-digit comparable store sales in the fourth quarter," he said.

Ultimate estimates the current year' sales volume at $815 million to $830 million, a 16 percent to 18 percent increase over fiscal 2003, which recorded sales of $704.4 million, up 21 percent from the $580.2 million reported in the previous year. Comp-stores sales were off 2 percent for the 12 months just ended.

The retailer reported net income of $6.7 million for its most recent 12 months, down from $12 million year over year. Looking ahead, Ultimate anticipates a negative net in the current first quarter, break-even results in the second and positive earnings in the third and fourth quarters.

Gross profit margin slipped 30 basis points, to 30.7 percent for the year just ended, while SG&A expenses increased 150 basis points, to 29.1 percent.

For the most recent 12 months, the television/DBS category claimed a 41 percent share of company sales, up from 38 percent a year earlier. Audio dropped from a 20 percent share to 19 percent in the 12 months, while video/DVD slipped to 15 percent, from 17 percent.

Mobile remained firm, at a 9 percent share for the 12 months, while home office dropped from a 4 percent share, to 3 percent.

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