Industry Financial View Uncertain

Financially, the winter months have been all over the map. Some electronics companies have reported upswings in revenue, but others are experiencing a decrease.

In mid-March, Boston Acoustics projected a previously unexpected net operating loss for its fiscal 2005 first quarter, ending May 31, 2004. (BA's fiscal year begins March 1.) Reasons included a 50% cutback in orders from an unnamed major purchaser—rumored to be Tweeter Group—whose prior business accounted for 32% of BA's net sales for the 9-month period ending December 31, a total of $41.1 million.

BA also supplies Ultimate Electronics, Harvey's, Magnolia Hi-Fi, and Washington, DC–based Myer-Emco. Boston executives told reporters that they expect the first-quarter loss to be "offset by increases in sales to other companies," and predicted a profitable 2005 fiscal year.

New York metro area retailer Harvey Electronics reported a slight decline in sales for its first fiscal quarter, ended January 31. The Lyndhurst, NJ–based firm posted sales of $12.4 million, compared with $13 million for same period the previous year, which was one week longer than this year's 13 weeks. Net income was $350,288, compared to $420,643. On a weekly basis, the company's income was off 10% most recently versus the same period last year. Gross profit margin in the first quarter dropped slightly, to 40.3% from 40.5% in the same three months last year.

Harvey's product mix is increasingly tilted toward video, with that category accounting for 50% of net product sales for the first quarter. During the same period last year, Harvey's video segment accounted for 45% of its business. Custom installation (sales and labor combined) accounted for about 56% of the company's net income during the first quarter, in which the custom division pulled in $7 million. Harvey's president, Franklin Karp, said the company would continue to focus on the growing business of custom installation.

Comparable-store sales were off 9% for the quarter ended January 31, and down 10% for the year, Denver-based Ultimate Electronics reported last month. The retailer reported sales of $242.3 million for the quarter, and a total of $711.9 million for fiscal 2003, results that were essentially flat compared with the previous year periods.

Ultimate abandoned computer products during the most recent quarter, a move that accounted for 50% of the sales decline in January and 28% of the drop for the quarter. Like Harvey's, Ultimate is pushing custom installation hard, with a separate division working only with homebuilders.

While business at brick-and-mortar outlets holds more or less steady, sales at their online counterpart are going off the charts. In January, reported that its consumer electronics unit sales had grown by 50% during the 2003 calendar year. The company shipped 2.1 million pieces of electronics to end users during the year, for a total exceeding $1 billion. Amazon increased its number of available models by 40% last year, claims to offer 10 times the selection found in most retail stores, and includes free shipping on every order over $25.