CANTON, MASS. — Claiming one of the better all-around quarters in its public reporting history, Tweeter Home Entertainment Group reported a 39.8 percent increase in net income in its fiscal second quarter, reaching $3.8 million, up from $2.7 million in the year-ago three months.
Total revenue climbed 36.8 percent to $117.8 million in the fiscal second quarter ended March 31, up from $86.1 million in the same quarter in 2000. Comp-store sales increased 3.6 percent, excluding the United Audio Centers and Douglas TV chains.
Income from operations climbed 37.8 percent in the second quarter, to $5.7 million, compared with $4.2 million in the year-ago second quarter.
With labor revenue from its home installation business and continued penetration of higher margin digital and new technology products driving improvement, Tweeter registered a 20-basis-point increase in gross margin during the second quarter, hitting 37.2 percent, compared with 37 percent in the same quarter last year.
Overall gross margin was offset somewhat by the retailer's continuing growth in the video category as a percentage of its overall mix, since video generally delivers lower gross margins than other components in the product mix.
Primarily due to increases in compensation costs associated with building infrastructure in the home installation business, Tweeter saw its selling expenses as a percentage of revenue expand 20 basis points to 26.7 percent in the second quarter, compared with 26.5 percent year-over-year.
"Our home installation business strategy is cemented in the notion that, at the very least, this business can be a hedge against the potential for declining margins, as television sales become a larger part of our overall business," said Jeff Stone, president/CEO. "As long as we execute our strategies around home install, digital television and audio, we believe that we can maintain our historical gross margin levels."
Looking ahead, Joe McGuire, Tweeter chief financial officer, said, "Due to the uncertain economic environment, we have revised our internal expectations for the quarter ending June 30. We have planned for flat comp-store sales growth, and, as a result, are anticipating revenues in the range of $110 million to $112 million."
Tweeter also said it also was able to reduce inventory during the quarter by 16 percent, to $81.5 million, from $97 million at the end of December. Annualized inventory turns are put at 3.7 times, compared with 3.0 turns during the same period last year.
For the six months, Tweeter's net income rose about 25 percent to $13.6 million, up from $10.8 million in the same six months last year.
Total revenues for the six months rose about 33 percent to $279.8 million, compared with $209.6 million in the same quarter in 2000.
Tweeter started the year with 90 units. Eight stores were added through the acquisition of Douglas TV locations last October and four Big Screen City stores in the past month. The planned acquisition of Audio Video Systems will add three more.