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, Amazon.com 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.

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