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Ultimate Electronics Q3 Revenue Soars 34%

Specialty consumer electronics retailer Ultimate Electronics reported higher income, sales and profit margin in its fiscal third quarter.

Net income reached $1.70 million in the three months, up from $1.68 million, while profit margin climbed 20 basis points to 32 percent, compared with 31.8 percent.

Revenue, as reported earlier, soared 34 percent in the third quarter, hitting $177.8 million, up from $132.8 million in the year-ago period. Comp-store sales edged up 1 percent in the third quarter.

‘Given the current economic conditions, we are satisfied with out total sales growth, the positive comparable store sales, our gross margins and earnings for the quarter,’ said Ed McEntire, CEO.

Margins by category generally improved in the third quarter, ended Oct. 31, over the prior year, with the biggest increases in televisions, said Ultimate. Plasma and LCD television sales, which have higher than average television margins, grew 525 percent in units over the same period a year ago. Other significant areas of sales growth included cellular phones, mobile video, digital still cameras and DVD products.

Ultimate did report an increase in Selling, General and Administrative (SG&A) expenses in the third quarter, up 80 basis points to 30.5 percent, compared with 29.7 percent year over year.

Ultimate’s merchandise mix for the quarter shifted to the television and DVD categories, away from audio, home office and VCR products.

The television/DBS category notched 45 percent of third quarter merchandise sales, holding down a 45 percent share, compared with 41 percent in the same quarter in 2001. Third quarter merchandise sales in the audio category slipped to a 17 percent share, down from 19 percent in the same period last year.

The video/DVD category held down a 13 percent share in the period, compared with 14 percent year-on year. Mobile stood firm with a 9 percent share in both the third quarter of 2002 and 2001, while home office edged downward to a 3 percent share in the three months, compared with 4 percent in the third quarter of last year. The other category held a 13 percent share in both years.

For the nine months, Ultimate recorded sales of $462 million, up 26 percent from the $365.5 million recorded in the same period last year. Comp-store sales were up 1 percent. Net income reached $4.3 million for the nine months, down from $5.2 million in the year-ago nine months.

Gross margin for the nine months dropped 20 basis points, to 31.6 percent, down from 31.8 percent in the prior year period. SG&A for the nine months increased to 30.1 percent, up 60 basis points from the 29.5 percent reported in the same nine months in 2001.

Ultimate remains cautious about the overall strength of the upcoming holiday season, and its expects to have its fourth quarter impacted by the lateness of the Thanksgiving holiday. The chain anticipates positive comp-store sales during the condensed holiday selling season, with total sales growth for the fourth quarter at about 27 percent, along with flat comps.