My comments in italics
Subject: CPU's Death is greatly exaggerated
Date: Wed, 30 June 1999 07:08 PM EDT
From: Bonzo3
Message-id: <19990630190853.20355.00006376@ng-fu1.aol.com>
CompUSA Inc. Reports Net Sales Up 23%
DALLAS, June 30 /PRNewswire/ -- CompUSA Inc. (NYSE: CPU), America's Largest Computer Superstore(R) retailer, today announced record sales for the fourth quarter of fiscal 1999, ended June 26, 1999. Net sales for the fourth quarter increased 23% to $1.46 billion from $1.19 billion for the comparable period ended June 27, 1998. Comparable store sales were up 1.0% in the fourth quarter of fiscal 1999 for the 155 stores open one year or more. Sales from 37 converted Computer City stores that CompUSA is continuing to operate are included in the fourth quarter net sales figure but not in the comparable store sales calculation.
Same store sales were up +1%. Not exactly robust but '98 was a better year for CPU. It proves many people still shop brick & mortar, and in particular CPU. That's why I discount most anecdotal stories about individuals "shopping experiences".
Most of the store closings should be the unprofitable Circuit City stores. It was a mistake and CPU should take the write-offs and put that sad chapter to an end.
For fiscal 1999, net sales increased by 20% to $6.32 billion from $5.29 billion for fiscal 1998. Comparable store sales decreased by 3.4% for fiscal 1999 for the 155 stores open one year or more. Sales from the converted Computer City stores for the month of September 1998 and for the nine months ended June 26, 1999 are included in the fiscal 1999 net sales figure but not in the comparable store sales calculation.
You mean to tell me CPU did $6.32B in sales, a 20% increase over 1998, and there are some who are saying CPU will never see Year 2000? Give me a break. That's $6.32 billion dollars - sheesh! If they can expand those margins just a bit, perhaps 50-100 basis points, there is tremendous profit potential with that robust top line.
Technical Services sales and Training sales for the fourth quarter increased 29% to $36 million and 17% to $30 million, respectively, from the comparable period a year ago. For fiscal 1999, Technical Services sales and Training sales increased 41% to $139 million and 22% to $114 million, respectively, compared to fiscal 1998.
Whoop there it is. CPU's greater focus on technical services and training is starting to pay off. 29% and 17% increases in Q4, is robust growth for any PC retailer/distributor in todays environment. For the year its 41% and 22% - that's great!
Average selling prices of desktop computers compared to the fourth quarter of fiscal 1998 decreased approximately 20% and compared to the third quarter of fiscal 1999 decreased approximately 7%. Compared to the fourth quarter of fiscal 1998, unit sales of desktop computers increased approximately 60%.
Now one last time for the doom & gloomers, I have stated this numerous times in the past, ASP is CPU's core problem - not volume or store traffic - look at unit sales growth of 60%- they are selling product. They are turning inventory. There are people shopping and buying in the stores and there are corporate purchase orders. Its Margins, margins, margins - they simply must improve, either through higher prices (unlikely at this time) expense reduction, (more likely)and product re-mixing/re-positioning (an absolute must).
The Company plans to announce operating results for the fourth quarter and fiscal 1999 on August 18, 1999, after the market closes.
I'm reasonably happy with this pre-announcement. CPU remains a Speculative Buy and there is room in my current portfolio for a little speculation. Is it all good? NO. There is much work to do. That's why it trades at 7 bucks and change. That said, there is far greater upside potential than downside. All imo.
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