Concluding what it called a "disappointing year from a sales and profit perspective," Tweeter Home Entertainment Group posted flat fourth quarter sales and net losses for both its fiscal fourth quarter and 12 months.
Fourth quarter revenue edged upward 1 percent, coming in at $184.9 million, compared with $183 million in the same period last year. Comp-store sales decreased 6.8 percent in the three months.
Net loss for the fourth quarter, ended Sept. 30, reached $10.3 million, compared with net income of $516,000, excluding a $195 million impairment charge and its $13 million related tax benefit. Including charges, the fourth quarter loss was $181.3 million.
"Fiscal 2003 was a difficult year for Tweeter as it was for many retailers in our space and in retailing at large," said Jeff Stone, president/CEO. However, pointing to the changes the retailer made over the 12 months, Stone said, "Tweeter is a smarter and better organization than it was 12 months ago, and we will continue with this 'change pace' in 2004."
In the fourth quarter, Tweeter recorded a $16.1 million loss from operations, compared with income of $1.6 million, excluding the impairment charge. The retailer also reported a large gross margin drop, with an increase in selling and corporate expenses.
In a recent analyst conference call, Tweeter said it continued to extend its service capabilities, with its service operation in the fourth quarter accounting for 3.1 percent of total sales, compared with 2.5 percent year over year. Service was up 26 percent in labor dollars during the three months.
Tweeter also told analysts it has a 20 percent ownership position in Tivoli, an audio maker of speakers and tabletop radios. This accounts for a $165 million stockholder's equity position listed on Tweeter's fourth quarter balance sheet. Tweeter carries Tivoli speakers, and Tivoli Designs, a Tivoli company, sells a line of entry-level speakers exclusively through Tweeter.
A nearly 6 percentage point decline in gross margin in the fourth quarter, to 29.8 percent, from 35.6 percent, was attributed to an aggressive campaign last August and September to reduce open-box and discontinued inventory. It cost $8 million in gross profit reductions to achieve its goal of lowering discontinued inventory from about 17 percent to about 10 percent of total inventory by the end of the fiscal year. Net inventory finished the 12 months at $118 million, compared with the year-earlier inventory ending level of $143 million. The retailer is shooting to get discontinued inventory down to 8 percent of the total in the next two years.
For the 12 months, revenue decreased 1.1 percent, to $787 million, down from $796.1 million in the prior year. Comp-store sales dropped 9.9 percent, excluding the Hillcrest stores, purchased last March.
Net loss for the 12 months reached $11.7 million, compared with net income of $16.7 million year on year, excluding the impairment charge and related tax benefit. With the charge, the previous year net loss hit $165.1 million. Tweeter said it posted its first operating loss since 1993, excluding the impairment charge.
In the current first quarter of the new fiscal year, ending in December, comp-store sales are down 4.6 percent, through Nov. 21, said the retailer. Tweeter expects comps to be between a negative 3 percent and up 1 percent in its fiscal first quarter, with stores up against a negative 16.7 percent comp-sales figure for the month of December. As a result, it anticipates quarterly revenue of $251 million to $259 million.
Looking at a more limited growth plan for the coming months, Tweeter plans to open three new stores in the current fiscal year and remodel four. In the past 12 months, it opened 12 new stores and closed five.