Packing a hard-hitting punch, despite a flagging economy and the events of Sept. 11, Ultimate Electronics reported increases in both total revenue and comp-store sales for its fourth fiscal quarter.
The specialty home entertainment and consumer electronics retailer boosted sales 26 percent in the three months ended January 31, hitting $214.7 million, up from $170.2 million in the year-ago period. Comp-store sales rose 2 percent in the fourth quarter.
Net income, however, dropped to $6.8 million in the fourth quarter, down from $7.4 million in the same period a year ago.
"The fourth quarter results were encouraging from both a revenue and earnings perspective in light of the general economic conditions and the tragic events of last September," said Ed McEntire, CEO. "Positive comp-store sales growth in the fourth quarter and success in our two newest markets, St. Louis and Oklahoma City, give us confidence that our current business model is serving our customers well in both our existing and new markets."
Ultimate reported continuing growth in digital products, with unit sales of digital televisions — including CRT, plasma, LCD and projection — increasing 105 percent during the fourth quarter. Average selling price was 21 percent higher than the industry, said the retailer, and digital TV sales now represent over 70 percent of the chain's TV business.
Unit sales of DVD increased by 46 percent during the quarter, primarily in the progressive scan, portable and combination unit areas. Average selling price for DVD units was $240, which compares to the industry average selling price of $145, Ultimate said.
The retailer's fastest growing product segment in home audio — prepackaged DVD home theater systems — saw unit sales increases of more than 150 percent during the three months.
Ultimate also said it experienced continued growth in digital satellite radio, digital satellite receivers, mobile video, digital cameras, video games and new home networking devices.
Fourth quarter sales by category, compared with the same quarter the previous year, placed television/DBS at 39 percent vs. 35; audio, 21 percent vs. 22; video/DVD, 18 percent vs. 20; mobile, 6 percent vs. 7; home office, 4 percent vs. 5; and other, 12 percent vs. 11.
Fourth-quarter gross margin slid by 70 basis points, to 29.7 percent, mainly due to higher-than-expected inventory shrinkage, reduced amortization of warranties sold prior to Feb. 1, 2000 and the continued shift in merchandise mix toward lower margin products such as television and DVD.
Selling, general and administrative (SG&A) expenses in the fourth quarter increased by 120 basis points, to 24.6 percent. This was due mainly to increased net advertising and store pre-opening expenses.
For the 12 months, sales jumped 20 percent, reaching $580.2 million, up from $484.4 million in the year-ago period. Comp-store sales were down 2 percent for the year.
The retailer reported net income of $12 million for the 12 months, down from $14.6 million in the fiscal year ending in 2001.
Gross margin for the year decreased by 40 basis points, to 31 percent, while SG&A climbed 110 basis points, to 27.6 percent.
The retailer is planning for sales growth of 20 percent to 25 percent in the first half of its fiscal year, with comp-store sales in the low single digits.