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Plummeting sales of CRT TVs and a decline in income from its synthetic fuel investments pushed Rex Stores' third-quarter results down by double digits.
Net sales for the three months, ended Oct. 31, fell 7.2 percent to $85.2 million while comp-store sales declined 5.6 percent year-over-year. Comps for the month of November were flat.
Net income fell 30.4 percent from the year-ago period, to $4.8 million. Inventory, at $116.1 million, was also leaner this year than last, down 14 percent.
Impacting the results was a falloff in income from synthetic fuel plants that had temporarily ceased production, the company said. The plants have since returned to operation.
During the quarter Rex sold seven retail stores for a total of $6.8 million, recording a $2.2 million pretax gain and leaving the chain with 207 stores in 36 states.
In a conference call, chairman/CEO Stuart Rose attributed the poor retail results to a difficult transition to flat-panel TV. "We were hurt very badly by the phase out of older products," he said, including direct view and CRT rear-projection TVs.
Specifically, sales of older technology TVs fell 71 percent during the quarter, representing a loss of $8 million in sales. By contrast, LCD dollar volume was up 222 percent and plasma sales increased 32 percent, although the gains were insufficient to offset the CRT declines. Rose said those products were still selling well last year within Rex's trading areas, which tend to lag the greater marketplace, and that he hadn't anticipated the "huge drop off" in demand.
In response, the company is "bulking up drastically" in flat-panel displays, although significant price erosion in plasma TVs and marketplace competition has proved problematic for that category as well.