CPU - A different perspective.
From Briefing.com
COMPUSA INC. (CPU) 13 3/4 -1 5/16. The fortunes for this once leading retailer of personal computer hardware, software, and accessories continues to sour. While the company reported better than expected fiscal Q1 results of $0.09 a share, profits were 64% below year-ago net of $0.25 a share. At the same time, the company did not provide a resounding positive outlook for the upcoming quarter. In fact, CompUSA expects single-digit negative sales comparisons in its fiscal Q2 as declining prices for personal computers continue to pressure margins and profits. This latter trend is an ominous negative for the sector, especially PC makers who have enjoyed a boost in renewed investors interest during the past few weeks. While this is the not the first time that CPU has cautioned about softer PC prices, the spread of lower prices is also appearing at the corporate level, which does not bode well for direct PC marketers that have made a bundle by skipping the middle guy. While direct marketers can be expected to be able to absorb a greater slash in prices, at some point, lower selling prices will start to eat into the bottom line, especially if the lower selling price cannot be offset by higher sales volume. CompUSA appears to be in a tough spot of not being able to realize more profits from selling more products. In the latest quarter, the company had an increase in sales of 17% to $1.39 billion, yet has not been able to offset the pricing pressures. Already current estimates for Q2 are below year-ago profits of $0.36 a share; hence expects the current mean estimate of $0.28 a share to move down in subsequent weeks. Also, while at the moment investors are viewing the latest earnings release release and cautious outlook by CompUSA as being issue specific, the continuing decline in selling prices as described by CPU is not a good things, and a sign that not all is well in computer-land. |
