San Francisco – Favorable changes in cost structure helped specialty retailer Good Guys narrow its net loss to $1.8 million in its fiscal second quarter, down from $4.5 million in the year-ago period.
Good Guys said its improved financial performance resulted from the continued reduction of selling, general and administrative (SG&A) expenses, which benefited from improved operating efficiencies and continued cost containment efforts.
Since the beginning of the year, Good Guys has taken numerous steps to reduce costs, including closing seven stores, renegotiating more than a dozen store leases, restructuring support operations, lowering financing costs through an improved credit arrangement, improving supply chain management and retiring a number of expensive operating leases.
As reported, second-quarter sales dropped 7.4 percent, to $177.5 million, down from $191 million, reflecting the closure of the seven stores. Comp-store sales decreased 3.7 percent.
Gross margin in the second quarter, ending August 31, slipped 110 basis points, reaching 28.6 percent, compared with 29.7 percent in the same three months in 2001. The drop reflects both aggressive inventory management as well as an increase in sales of video products as a percentage of total product sales. This was driven by demand for high-definition televisions and flat panel displays.
The shift in merchandise is demonstrated by Good Guys’ second-quarter sales mix. Video held a 58 percent share, compared with 57 percent in the same quarter last year. Audio dropped to a 17 percent share, compared with 19 percent in the second three months of 2001. Mobile and wireless remained steady at a 14 percent share for both this year’s second three months and last. Combined accessories, consumer electronics furniture and blank media accounted for a 11 percent share in the second quarter, up 1 percentage point over the same period the previous year.
For the six months, Good Guys reported a net loss of $6.4 million, down from $14.6 million in the first half of last year.
Sales dipped to $348.5 million, compared with $362.5 million year over year. Comp-store sales for the six months declined less than 1 percent.
Good Guys said it reduced SG&A expenses by more than $11 million and 210 basis points in the first half, down to 28.6 percent, compared with 30.7 percent in the first six months of last year.
Gross profit margin for the six months slid 40 basis points, to 28.7 percent, down from 29.1 percent in the year-ago period.
Looking ahead, Kenneth R. Weller, chairman/CEO, ‘continues to believe that there is upside potential in both sales and margins as we strive to improve the customer experience and further differentiate our product selection.
‘However, we believe that our revised cost structure will allow us to achieve our goal of returning to profitability even with modest declines in comparable store sales and gross profit margins in the second half of the year,’ said Weller.