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Tweeter Q1 Revenue Soars 55%, Comps Off 1.6%

Canton, Mass. – Mid- to high-end specialty A/V consumer electronics retailer Tweeter Home Entertainment Group enjoyed a 55 percent increase in revenue during its fiscal first quarter. The chain reported total revenue of $252 million during the three months ended Dec. 31, up from $162 million in the same quarter in 2000.

However, comp-store sales decreased by 1.6 percent for the three months, excluding the Sound Advice, Audio Video Systems and Big Screen City chains.

Tweeter’s net income for its first quarter climbed nearly 38 percent, hitting $13.5 million, compared with $9.8 million in the year-ago period.

Due to the ongoing uncertain economic environment, Tweeter is planning for flat comp-store sales growth for its upcoming fiscal second quarter, ending March 31. The chain anticipates revenue in the range of $190 million to $194 million for this three-month period.

‘We are particularly pleased that we have been able to generate stable gross margins,’ said Jeffrey Stone, president/CEO.

‘We launched our home installation strategy about two years ago. We did this with the knowledge that our video business, which carries lower margins than audio, would continue to increase due to digital/HDTV,’ continued Stone. ‘This strategy was implemented as a hedge against the potential for lower overall product margins. We are seeing the results of our strategy this first fiscal quarter as our gross margin is up.’

Tweeter’s gross margin percentage during the first quarter climbed 60 basis points to 36.5 percent, compared with 35.9 percent in the same quarter last year. Much of this improvement is due to an increase in labor revenue, compared with last year, said Tweeter. Home installation labor revenue climbed to $3.7 million, or 2 percent of total revenue, up from 0.8 percent of total revenue in the same three months in 2000. This added 40 basis points to the gross margin, said Tweeter.

Income from operations increased 48.4 percent to $23 million in the first quarter, up from $15.5 million in the yea-ago three months. As a percentage of total revenue, income from operations slid 9.1 percent in the first quarter, from 9.6 percent in the same period in 2000. This was primarily due to an increase in both selling and administrative expenses (SG&A) as a percent of total revenue, partially offset by an increase in gross margin, said Tweeter.

SG&A rose 90 basis points, to 23.2 percent in the first quarter, up from 22.3 percent the previous year. This was due to increased occupancy costs for new stores, fees and other costs. Tweeter opened eight stores in the first quarter and is planning to open 12 more during the balance of the fiscal year.