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Guitar Center First Quarter 2002 Sales Increase 18% On a Year-over-year Basis
First Quarter Same Store Sales Increase 5%Company Raises Revenue and Earnings Forecast for Second Quarter
WESTLAKE VILLAGE, Calif., Apr 25, 2002 (BUSINESS WIRE) -- Guitar Center, Inc. (Nasdaq NMS: GTRC chart, msgs) today reported net sales were ahead of expectations for its first quarter ended March 31, 2002, increasing 18% to $ 251.5 million, compared to $213.2 million in its 2001 first quarter. Also ahead of the Company's projections, net income for the first quarter was $3.4 million, or $0.15 per diluted share. This compares to net income of $5.0 million, or $0.22 per diluted share, in the first quarter of 2001.
Marty Albertson, president and co-chief executive officer of Guitar Center, said, "First quarter sales topped our expectations and created leverage in our business which enabled us to achieve earnings per share 25% above our original projections. While we continue to be cautious regarding our near-term outlook, we are pleased with the positive response to our advertising throughout the quarter and are optimistic regarding the trends we are experiencing in our business.
"Both our Guitar Center and American Music stores performed very well during the quarter. And, we are encouraged by our 5% increase in comparable store sales. We also turned in a strong operating performance in our direct response division. In terms of new business areas within Musician's Friend, our specialty DJ and drum catalogs continued to perform well. We continue to recognize the benefits of the consolidation of our fulfillment operations to our Kansas City facility. Our "marry up" shipping software was fully implemented during the quarter and we began to achieve the expected benefit from this with reduced shipping expense per customer toward the end of the quarter."
At the corporate level, Guitar Center continues to benefit from interest expense that is below forecast due to low rates on our line of credit and favorable cash flow resulting in lower than expected borrowings.
Retail Division Turns in Strong Performance
During the first quarter Guitar Center opened two new large format retail stores in Charlotte, North Carolina and Grand Rapids, Michigan, as well as three new small format stores in Ogden, Utah, Little Rock, Arkansas and Corpus Christi, Texas. In addition, the Company acquired a store in Raleigh, North Carolina and is converting that store to the Guitar Center brand.
Net sales from retail stores grew 18% to $205.5 million for the quarter from $174.2 in the first quarter of 2001. Sales from new stores contributed $22.9 million, or 73% of the total increase. First quarter comparable store sales increased 5%. First quarter gross margin for the retail stores was 24.5% after buying and occupancy costs, compared with 24.4% in the first quarter of 2001. Selling, general and administrative expenses for the retail stores, inclusive of corporate general and administrative expenses were 21.3% of net sales for the quarter, which was slightly better than anticipated. This compares to 20.0% in the first quarter of 2001.
Solid Growth in Direct Response Sales
Net sales for the direct response division increased 18% to $46.1 million compared with $39.0 million in the same period in 2001. In the first quarter, gross margin for the direct response division was 29.7% compared to 31.4% in the first quarter of 2001. Selling, general and administrative expenses for the direct response division were 25.1% of net sales for the quarter, which was also better than expected. This compares to 23.0% in the same period last year.
Business Outlook
Guitar Center expects to open one new large format store in the second quarter in Columbus, Ohio. Additionally, in May the Company plans to relocate its original North Dallas store in Texas into larger premises with higher storefront visibility, as well as hold the grand opening for its recently acquired Raleigh, North Carolina store.
Based on first quarter results, as well as current business and economic conditions, we are increasing our sales and earnings projections for the second quarter of 2002. We expect that second quarter 2002 net sales will be in the range of $245 million to $250 million and that second quarter 2002 earnings per share will be in the range of $0.13 to $0.14. As a result of the increases in the first and second quarters, the Company's earnings per share estimate for all of fiscal 2002 is being increased to $0.97 to $1.03 from previous guidance of $0.91 to $0.97.
The comments regarding the future financial performance in the immediately preceding paragraph constitute forward-looking statements and are made in express reliance on the safe harbor provisions contained in Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. This information, as well as other forward-looking information provided, should be read in conjunction with the information under the caption "Business Risks and Forward Looking Statements" below.
Teleconference and Webcast
Guitar Center will host a conference call and audio Webcast today at 2:00 p.m. PDT to discuss financial results for the first quarter ended March 31, 2002. To access the call, dial (800) 233-2795. The Webcast will be simultaneously available through a link on the Company's Web site www.guitarcenter.com and may also be accessed through CCBN at www.companyboardroom.com. If you are unable to participate in the call live, a replay will be available through May 2, 2002. To access this service, please dial (800) 945-0822. |
