Chicago — Excess retail inventory in certain categories coming out of the holiday season helped lower first-quarter sales at Cobra Electronics by about 15 percent, down to $19.3 million, from $22.7 million in the year-ago period.
Cobra reported $5.7 million in net income for the three months, ended March 31, compared with a net loss of $564,000 in the first quarter of the prior year. The first-quarter numbers included certain non-operating gains. Absent these one-time events, the mobile communications products maker would have recorded a net loss of $1.4 million.
Gross margin in the first three months was 21.7 percent, compared with 22.7 percent in the first quarter of 2004. Expenses for the period reached $6.3 million, up from $5.9 million year-on-year.
The company reported an operating loss of $2.1 million in the first three months, an increase over the operating loss of $778,000 recorded in the first quarter of the prior year.
“Cobra’s greater first-quarter loss on an operating basis reflects the increased seasonality of our business as well as the shift to the second quarter of new product reset shipments to one of our larger customers,” said Jim Bazet, president/CEO.
“Additionally, sales were affected by retailers coming out of the holiday season with excess inventory in certain categories. In particular, some of our larger customers overestimated the demand for mobile navigation in the fourth quarter and sought assistance from manufacturers to reduce the inventory prior to the end of the fiscal year in the form of discounts and product returns.
“In response, Cobra implemented several programs to assist them,” continued Bazet. “While these actions were detrimental in the short term, adversely impacting both sales and gross margins, we believe the benefits to Cobra will be realized later this year and beyond as the competitive environment for mobile navigation products increases along with the demand for retail shelf space.”
Cobra said inventory increased to $22.5 million in the first quarter, from $19.4 million the previous year.
Cobra’s Bazet, noting the company’s strong balance sheet in the first three months, said, “Cobra is actively seeking strategic acquisitions, recognizing that we have tremendous marketing and distribution capabilities that can be leveraged with additional products.
“[Our] cash balance provides greater flexibility in pursuing such acquisitions and would permit Cobra to avoid excessive debt upon completing a transaction.”
The company had no interest-bearing debt at the end of the first quarter and $6 million in cash.