Audiovox Outlines Distribution, Product Strategy

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Hauppauge, N.Y. - Audiovox expects to meet its full-year profit forecast by following through on multiple initiatives.

The initiatives include an increasing focus on higher-margin products and new distribution channels for select products. Combined with a bottom line tracking ahead of plan, Audiovox expects to meet its full-year profit forecasts even if holiday sales come in less than projected, executives said during an investors' conference call.

Margins are running ahead of projection, and overhead is lower than expected, the company said. Margins for the fiscal second quarter ending Aug. 31 rose 650 basis points to 27.7 percent, and first-half margins were up 600 basis points to 27 percent.

"Irrespective of the economy, we are on track to meet guidance," said president/CEO Pat Lavelle. Retailers, he noted, "remain cautious in buying," but the company has been shipping quantities as projected.

The company also outlined the first of several products that it will launch in the location-based services (LBS) market. The first product is the Audiovox Car Connection Powered by Sprint, which will be shown at International CES for first-quarter shipment to retailers. It plugs into a vehicle's OBD II (on-board diagnostics) port to enable vehicle tracking, geo-fencing, speed notification, and driver-scoring statistics for fleet and consumer users. For consumers, it could also be used to deliver driving-habit information to insurance companies. The device can also be used to prevent texting while a vehicle is in motion.

New distribution channels for the company include hardware and home furnishings chains for Acoustic Research wireless speakers. The retailers include Menards, Lowes, True Value, and Bed Bath and Beyond.

Health-care and eye-care retailers have been targeted with a non-medical personal sound amplifier designed to enhance hearing in people with mild to moderate hearing loss. RadioShack is already selling the device in 2,000 stores.

Wireless-carrier stores are also a new channel, and they're getting headphones designed for the iPhone and for Verizon's Droid-branded Android smartphones. Audiovox is selling to the AT&T and Verizon Wireless stores.

The company is also pursuing the hotel market with universal remotes.

Responding to questions about Klipsch Group performance, Lavelle said Klipsch is running ahead of last year's top-line numbers and that Klipsch margins in the fiscal second quarter are "consistent with the plan put in place and with past performance,' Lavelle said.

Audiovox also said it identified further back-end synergies in such areas as warehousing, freight, logistics and systems that it could make to further improve its bottom line following the Klipsch acquisition earlier this year. The company "might have further adjustments" in the next 18 months, said senior VP/chief financial officer Michael Stoehr.

In other matters:

-- Fulfillment sales of satellite radios and sales of select mobile aftermarket products fell in the second quarter because of supply issue related to Japan's tsunami, Jeremy Stoehr, public relations assistant VP, said. He expects the shortage to be overcome in the company's fiscal fourth quarter.

--Second-quarter accessory sales, particularly those related to TVs, fell while accessory margins grew more than 600 basis points as the company began to focus on higher margin accessories.

--Mobile electronics sales to automakers grew as new-car sales growth resumed and its top customers posted year-over-year gains.


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