By Lisa Johnston
New products on display at the American International Toy Fair, held in N
Publicly held retail chains reporting their quarterly results recently — Amazon.com, RadioShack and Office Depot — provided a decidedly mixed picture of what went on at retail during the second quarter.
Amazon.com reported higher sales, but lower profits, RadioShack had lower sales, but higher profits, and Office Depot had a loss and lower sales, while hhgregg increased its public stock offering in preparation for a major expansion.
Amazon.com reported a 14 percent increase in net sales to $4.7 billion for its second quarter, ended June 30, while net income fell 10 percent to $142 million.
Excluding the unfavorable impact of foreign exchange rates, net sales would have grown 20 percent, the online retailer said.
Within North America, sales of electronics and other general merchandise grew 29 percent to $1.2 billion, while net sales increased 35 percent to nearly $2.2 billion.
Analysts said the company sacrificed profits for sales growth, as aggressive pricing cut into margins, although Amazon attributed the earnings shortfall to a $51 million settlement payment to Toys “R” Us over a longstanding breech of contract suit.
Continued cost-cutting at RadioShack and easy year-ago comparisons helped boost the CE chain's second-quarter profits despite a slowdown in sales.
Net income rose nearly 18 percent to $48.8 million for the three months, ended June 30, while net sales slipped 2.9 percent to $965.7 million and same-store sales fell 4 percent.
Operating income rose 12 percent to $87.7 million after adjusting for the one-time lease charge and a state sales tax settlement.
Income was aided by reduced advertising and compensation, which lowered selling, general and administrative (SG&A) from 37.7 percent of sales to 34.8 percent of sales year over year.
Weaker sales of wireless accessories, digital-to-analog converter boxes, GPS products, music players and digital cameras contributed to the comp-sales decline. RadioShack sold about $50 million worth of converter boxes during the quarter, a period that included the digital broadcast transition, but expects sales to drop off in the second half.
Sales declines were partially offset by increased sales of netbooks, TV antennas, prepaid wireless handsets and airtime, TVs and VoIP products, the chain said, although the shift in sales mix toward such lower-margin products as TVs and netbooks lowered its gross margin rate by 110 basis points.
As of June 30, RadioShack operated 4,450 company-owned stores, 617 kiosks, 201 Mexican stores and 1,372 dealer-operated stores.
Office Depot reported an $82 million loss and a 22 percent decline in sales to $2.8 billion for its second quarter, ended June 27.
The loss included about $35 million in pretax charges related to lease accruals, severance expenses and asset impairments.
Sales at the company's U.S. and Canadian stores fell 21 percent to $1.1 billion during the quarter, and same-store sales dropped 18 percent. The chain attributed the declines to the soft economy, which has caused consumers and small businesses to reign in spending on big-ticket items like office furniture and computers.
Revenue was also impacted by a reduction of 114 stores year over year, and a pullback in promotions for certain low-margin categories, the company said.
The North American retail division had an operating loss of $13 million, compared with a year-ago operating loss of $4 million.
During the quarter the company closed five stores, opened three and relocated one, bringing the total store count for North America to 1,158 as of June 27.
And hhgregg recently increased its public stock offering from 3 million to 3.5 million shares, which is expected to raise about $53.5 million for the retailer's war chest.
The electronics and appliance chain has also increased its credit line, from $100 million, to $125 million, according to a filing with the Securities and Exchange Commission.
hhgregg announced plans last month to enter the Baltimore, Philadelphia and Washington markets in 2010 as part of a major expansion into the Mid-Atlantic states. The push into large and midsized metro markets will include as many as 45 stores and a regional distribution center, the company said.
This TWICE webinar, hosted by senior editor Alan Wolf, will take a look at what may be the hottest CE products at retail that will be sold during the all-important fourth quarter. Top technologies, market strategies and industry trends will be discussed with industry analysts and executives.