Ultimate Posts Record Q2 Net

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DENVER -- Significant growth in digital entertainment products helped elevate Ultimate Electronics to record profits for the second fiscal quarter ended July 31. The retailer's net income of $2.25 million nearly doubled the $1.13 million reported in the comparable quarter last year.

Sales at Ultimate Electronics in the second fiscal quarter were $101.9 million, a 21 percent increase over the $83.9 million recorded in the same three months last year. Comp-store sales were up 15 percent for the quarter.

Ultimate Electronics reported that both the television/DBS and video/DVD categories enjoyed one-percentage-point increases as a share of total sales in the three months. Television/DBS, the largest category, accounted for 30 percent of all second-quarter merchandise sales, up from 29 percent in the same three months in 1999. Video/DVD as a category accounted for 17 percent of second-quarter sales, up from 16 percent in the year-ago three months.

Audio, the second largest category, dropped to a 22 percent share of total second-quarter sales, down from 23 percent last year. Mobile electronics dropped from a 15 percent share to 13 percent in the three months, while home office dropped to 5 percent, down from 6 percent in the comparable 1999 quarter.

"We continue to see significant growth in the new digital entertainment products," said Ultimate Electronics' president/chief operating officer Dave Workman. "Sales of HDTV increased 400 percent from the prior year, and DVD sales were up 62 percent during the same period. Digital camcorders now represent over 70 percent of our camcorder sales, raising our average camcorder selling price about 10 percent over the previous year."

Gross margins at Ultimate Electronics increased to 32.4 percent, up from 30.9 percent in the prior-year period. However, an increase in selling, general and administrative expenses to 28.9 percent of sales, from 27.9 percent during the prior-year quarter, was attributed to administrative expenses for pre-opening costs and costs associated with higher margins.

CEO Ed McEntire was extremely pleased with his chain's strong second-quarter operating results and said, "Comp-store sales were up 15 percent on top of the 20 percent increase in the prior year. Our operating margin for the quarter was 4.2 percent, excluding pre-opening costs, up from last year's operating margin of 3 percent. We enjoyed a ninth consecutive quarter of earnings growth."

For the six months, the chain reported net income of $3.8 million, following an extraordinary loss in the first quarter of $254,000. This profit figure compares to $1.5 million in the same six months last year. Sales for the six months were $196.9 million, compared to $162.4 million in the year-ago six months -- a 21 percent jump.

Comp-store sales were up 16 percent for the half. Gross margins were 31.9 percent for the six months, compared to 30.3 percent in the year-ago period.

Ultimate Electronics said planned openings of its three remaining new stores for this year -- two in Phoenix and one in Colorado Springs, Colo. -- are on track to happen early in the fourth quarter. The company operates a total of 33 units.


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