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CompUSA Inc. Reports Second Quarter Earnings
DALLAS, Feb. 3 /PRNewswire/ -- CompUSA Inc. (NYSE: CPU - news), America's Largest Computer Superstore® retailer, today announced net income of
$15.6 million for the second quarter of fiscal 1999, or $0.17 per share, compared with net income of $34.1 million, or $0.36 per share, for the second quarter of
fiscal 1998. Net sales for the second quarter of fiscal 1999, which ended December 26, 1998, increased 22% to $1.78 billion from $1.46 billion for the
comparable period ended December 27, 1997. Comparable store sales decreased 4.7% for the 148 stores open one year or more.
For the first six months of fiscal 1999, net income was $23.7 million, or $0.26 per share, compared with net income of $57.5 million, or $0.60 per share, for the
first six months of fiscal 1998. Net sales increased 20% to $3.17 billion from $2.65 billion for the first six months of fiscal 1998, while comparable store sales
decreased 3.3% for the 148 stores open one year or more. Sales from the 39 converted Computer City stores that CompUSA is continuing to operate are included
in the second quarter and six months net sales figures but not in the comparable store sales calculations.
''As we previously reported, this was a challenging and unique quarter for us, as we were busy converting the acquired Computer City stores while experiencing
increased unit sales growth and declining average selling prices,'' said James F. Halpin, president and chief executive officer. ''The Computer City chain as a whole
had an operating loss of approximately $100 million during the eight months before we acquired it. In order to reverse this trend at the converted stores, we needed
to generate additional traffic, which we accomplished through increased marketing efforts. While these promotions were successful, they also had a corresponding
negative impact on margins. I am pleased to report, however, that the former Computer City stores generated store operating income for the second quarter. Our
Team Members worked very hard to assure a successful transition and we are proud of the progress we have made. Since these stores currently generate about
half the sales of a traditional CompUSA Computer Superstore, we believe we still have additional opportunities for improvement, particularly in their corporate and
service businesses.''
Halpin continued, ''Compared to the second quarter of fiscal 1998, both desktop and notebook computer unit sales increased by more than 50% in the second
quarter of fiscal 1999 while average selling prices for both categories decreased approximately 20%. This reduction and the lower sales volume in the Computer
City stores were the primary contributors to an 18% decrease in average sales per store compared to the comparable quarter last year and a corresponding
increase of fixed expenses as a percentage of sales. In addition, some expenses -- such as freight -- are unit-driven and are unaffected by changes in average selling
prices.''
''Although it was a challenging quarter for our retail business, which typically generates approximately 60% of our sales, our other businesses experienced many
milestones,'' added Halpin. ''CompUSA Direct, our Internet and mail order business, had an outstanding quarter. We have been selling products on the Internet for
several years, and today, this area is one of our fastest growing businesses. We are currently increasing our resources devoted to this exciting area of our industry.
CompUSA PC(TM) began assembling desktop computers in November that have received favorable technical reviews and expects to start assembling notebook
computers this spring. In addition, our Technical Services group had its best quarter ever. Our goal is to position CompUSA as a world-class, total solutions
technology provider and we believe we are headed in the right direction.''
The Company stated that it expects comparable store sales to improve in the third quarter of fiscal 1999 as compared to the second quarter of fiscal 1999 as it
begins to cycle the decrease in average selling prices of a year ago. The Company also noted that due to the expected lower promotional activities in the third
quarter, gross margins are expected to improve compared to the second quarter. The Company further noted that the additional resources devoted to the
Company's Internet business should cause an increase in expenses of approximately $2 million to $3 million per quarter.
CompUSA Inc. is one of the nation's leading retailers and resellers of personal computers and related products and services. The Company currently operates 210
CompUSA Computer Superstores in 79 major metropolitan markets across the United States that serve retail, corporate, government and education customers and
include technical service departments and classroom training facilities. CompUSA also offers its own build-to-order personal computer series, the CompUSA PC,
and operates an Internet site located at www.compusa.com where customers can shop for over 50,000 items on-line.
This news release contains forward-looking statements about the business, financial condition and prospects of the Company. The actual results of the Company
could differ materially from those indicated by the forward-looking statements because of various risks and uncertainties, including without limitation, changes in
product demand, the availability of products, changes in competition, economic conditions, various inventory risks due to changes in market conditions, risks related
to the Computer City acquisition, and other risks indicated in the Company's Securities and Exchange Commission filings and reports. All of the foregoing risks and
uncertainties are beyond the ability of the Company to control, and in many cases the Company cannot predict the risks and uncertainties that could cause its actual
results to differ materially from those indicated by the forward-looking statements. When used in this press release, the words ''believes,'' ''plans,'' ''expects,''
''anticipates'' and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
(unaudited)
Thirteen weeks ended Twenty-six weeks ended
Dec. 26, Dec. 27, Dec. 26, Dec. 27,
1998 1997 1998 1997
Net sales $ 1,776,374 $ 1,456,725 $ 3,168,514 $ 2,648,537
Cost of sales and
occupancy costs 1,536,611 1,241,979 2,732,397 2,258,192
Gross profit 239,763 214,746 436,117 390,345
Operating expenses 170,461 125,658 316,761 234,907
Pre-opening expenses 2,095 4,028 3,461 5,480
General and
administrative expenses 38,358 28,793 70,995 54,408
Operating income 28,849 56,267 44,900 95,550
Other expense (income):
Interest expense 6,989 3,041 11,372 6,096
Other income, net (3,504) (2,166) (5,044) (4,084)
3,485 875 6,328 2,012
Income before income
taxes 25,364 55,392 38,572 93,538
Income tax expense 9,793 21,325 14,861 36,012
Net income $ 15,571 $ 34,067 $ 23,711 $ 57,526
Basic earnings per
share $ 0.17 $ 0.37 $ 0.26 $ 0.63
Diluted earnings per
share $ 0.17 $ 0.36 $ 0.26 $ 0.60
Weighted average common
shares 91,408 91,405 91,325 91,532
Weighted average
common shares
assuming dilution 92,834 95,508 92,938 95,511
CONSOLIDATED BALANCE SHEETS
(in thousands)
December 26, June 27,
1998 1998
ASSETS (unaudited)
Current assets:
Cash and cash equivalents $ 402,899 $ 151,779
Accounts receivable, net 254,988 214,084
Merchandise inventories 815,825 520,762
Prepaid expenses and other 30,946 36,242
Total current assets 1,504,658 922,867
Property and equipment, net 232,860 210,528
Costs in excess of net assets
of acquired businesses 91,390 3,069
Other assets 20,219 24,046
$ 1,849,127 $ 1,160,510
LIABILITIES AND
STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 966,809 $ 534,620
Accrued liabilities 196,702 99,380
Total current liabilities 1,163,511 634,000
Long-term debt 110,633 111,872
Note payable to Tandy Corporation 136,000 ---
Total stockholders' equity 438,983 414,638
$ 1,849,127 $ 1,160,510 |
