Rex's Q2 Sales, Net Soar

By Alan Wolf On Sep 15 2008 - 6:00am

Significant sales and earnings growth during its second fiscal quarter reflected Rex Stores' investments in alternative fuel production and veiled underlying weakness in its retail operations.

Company-wide sales rose 41 percent to $67.4 million for the three months, ended July 31, and net income increased 382 percent to $1.2 million.

In contrast, net sales for Rex's retail segment declined 11.3 percent to $42.5 million and comparable store sales slipped nearly 3.9 percent. Earnings fell 59 percent to $774,000 during the period.

In a conference call last week, chairman/CEO Stuart Rose said margin and comp sales declines at the regional electronics/appliance chain are "indicative of the extremely tough economic environment" and noted that comps are down 7 percent for the August-September period.

A 46 percent increase in comp sales of flat panel TVs during the quarter was insufficient to offset declines in DVD players, camcorders, analog rear projection TVs and room air, Rose said.

Although the impact of Hurricane Gustov was minimal, two stores that were closed for the storm will remain shut, and four stores in total are presently up for sale, he said.

Rex initiated a strategic review of its retail segment in June and has hired an investment banking firm to help identify and evaluate a broad range of options for its stores, including "opportunities to monetize" their real estate value. The review is expected to be completed by next quarter.