Chicago - Cobra Electronics reported lower profits and sales for the fourth quarter and the year ended Dec. 31.
For the quarter, Cobra reported net income of $1 million compared to $2.2 million a year ago. Sales decreased 15.6 percent to $42.6 million from $50.5 million. Gross margin for the fourth quarter increased to 27.9 percent from 26.9 percent in the fourth quarter of 2001, and from 23.4 percent in the third quarter of 2002.
'The combination of a weak retail environment, the uncertain credit-worthiness of a former large customer, and pricing pressures in the two-way radio market made for a challenging quarter for our company,' said Jim Bazet, Cobra president/CEO. 'Fortunately, our emphasis on providing added value, rather than low prices, allowed us to minimize our price reductions and increase our overall gross margin.'
According to Bazet, over half of Cobra's net sales shortfall relative to the year-ago quarter was the result of the company's decision to stop doing business with Kmart. While saying that the chain was a 'a valued customer' because of Kmart's problems 'the credit risk of continuing to do business with this customer was simply not in the best interests of our shareholders. We wish Kmart well, and we hope to be able to restore our business relationship with them in the future.'
Expenses for the fourth quarter increase to 23.9 percent of sales from 18.2 percent a year ago due to greater promotional support to retailers.
For the year ended December 31, 2002, net income was $1.7 million compared to $4.7 million in 2001. Sales for the twelve-month period decreased 9.5 percent to $135.8 million from $150 million in 2001. Gross margin decreased to 25.2 percent from 26.0 percent the prior year.
'Our sales and earnings reflect the difficult economy, which saw much of its growth concentrated in the housing and automotive sectors,' said Bazet. 'This intensified the pressure for reduced prices and increased promotional support, particularly in the two-way radio market.
Among the factors that effected the company's performance last year was the FCC's decision to regulate the radar detector industry, which Bazet said, 'is now behind us.' Cobra's accomplishments during 2002 included a 'significant' increase in sales to Wal-Mart and introductions of new products such as GMRS radios, among others.