Battered by a fiscal second-quarter net loss of $185,000, compared with net income of $85,000 in the year-ago period, specialty regional retailer Harvey Electronics is taking specific steps to deal with what the company calls a “slowdown” in its business.
Harvey is beginning a cost reduction program in its fiscal third quarter, including implementation of a one-week non-paid furlough for all non-union employees. Additionally, it will reduce its workforce where appropriate and review all SG&A expenses for reduction, according to the retailer's 10-Q filing with the Securities and Exchange Commission last week.
Net income for the six months, ended April 30, reached $89,000, far short of the $435,000 reported for the same period last year.
Earlier, Harvey reported second-quarter sales of $9.7 million, down 6 percent from a year-ago $10.3 million, as well as a 6.5 percent decrease in comp-stores sales (see TWICE, June 23, p. 6). For the six months, sales at the high-end retailer and custom installer slipped 4.1 percent to $21.8 million, down from $22.7 million the prior year. Comps for the six months decreased 4.4 percent.
On a more positive note, Harvey has launched a new service initiative called “Harvey on Demand,” which the retailer believes can expand its service niche by offering custom labor and other accessories for both Harvey customers and customers that have purchased products elsewhere — specifically on the Internet or from mass merchants. The company currently is marketing this new service group and is offering a 48-hour response time to address the needs of a qualified customer at an additional labor cost.
Gross profit margin for the second quarter decreased to 41.6 percent, down from 42.2 percent in the same three months in 2004. For the six months, gross profit margin came in at 41.9 percent, up slightly from the 41.2 percent reported in prior year's first half.
The decline in second-quarter margin was due to lower margins in Harvey's audio, video and labor sales, offset by additional higher margin cable and wire sales. Video sales have been impacted by price compression and competitive pressures in the market. Management sees this trend continuing.
Expenses in the second quarter increased 3 percent year-on-year, or by about $127,000, due primarily to payroll costs, net advertising expense and other factors. For the six months, expenses were up 4.1 percent, or by about $353,000.
Harvey said it plans to continue to hire additional custom installation personnel and incur the necessary expenses relating to the expansion of its custom-installation services.