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Good Guys Anticipates Lower Q3 Loss

SAN FRANCISCO –Good Guys expects to post a loss for the third quarter that is substantially lower than the $8.1 million loss racked up in the third quarter of 1999. With this anticipated loss, however, the retailer said it no longer expects to be profitable for fiscal 2000. Good Guys will issue third-quarter financial results on July 25.

A new in-store structure and an enhanced advertising campaign at Good Guys accounted for a 4 percent increase in sales for continuing categories and a 3 percent boost in comp-store sales for continuing categories during the third quarter ended June 30, compared to the same three months in 1999.

“While we have made tremendous progress over the past nine months, and the third quarter in particular, we have adjusted our expectations for the year to fully account for the initial disruption of the in-store reorganization and the impact of a more promotional sales effort,” said Ronald A. Unkefer, chairman/CEO.

“However, we remain confident that both our annual earnings before interest, taxes, depreciation and amortization and cash flow will be positive for the first time in five years, and that we will achieve solid sales increases in future quarters.

“Furthermore, we expect the changes we made during March and April to lead us to profitability in fiscal 2001, and bolster our prospects for sustainable, long-term profitability in the years that follow.”

The nation’s second largest electronics-only retailer posted total sales for the third quarter of $195.9 million, about a 7 percent drop from the $210.5 million registered in the third quarter of 1999. Good Guys attributed the expected decline in overall sales to the elimination of low-margin computers and home office products, and the de-emphasis of entry-level offerings.

The retailer said sales for the quarter improved month-to-month, with June achieving the highest levels of gross margin and comp store sales for continuing categories since 1994.

Sales of digital products, including high-definition televisions, cameras and camcorders and DVD players, contributed to the increase in sales for continuing categories, said Good Guys.

In addition, Good Guys, which placed No. 16 overall in the TWICE 1999 Retail Registry of the Top 100 consumer electronics retailers, said its renewed emphasis on mid- to high-end consumer entertainment electronics is expected to allow the company to achieve a gross margin of more than 28.5 percent for the third quarter, compared to 26 percent for the same period last year. It said extended contract penetration and inventory turns on continuing categories also improved over last year’s figures for the three months.

For the first nine months, total sales were $648.5 million, down about 10 percent from the $723.7 million recorded in the first nine months of last year. Comp-store sales for continuing categories remained flat for the period, while sales for continuing categories increased 1 percent.

Good Guys, back on April 1, had reorganized in-store operations and merchandise categories to reduce costs by about $9 million annually and improve the level of service in its 79 stores. The company also introduced an enhanced ad campaign designed to drive qualified customers to the stores through expanded placement as well as promotions and other incentives.

“This improved advertising effort combined with the restructuring of the in-store format and staffing structure will continue to play a pivotal roll in bolstering our sales performance by more effectively communicating and demonstrating Good Guys’ differentiation in product selection, price and overall customer service,” said Unkefer.