Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Non-Tech : CompUSA (CPU) -- Ignore unavailable to you. Want to Upgrade?

To: TH who wrote (1983)	3/31/1999 6:51:00 PM
From: Bonzo	Read Replies (3) \| Respond to of 3187

Subject: Re: Sales Report Date: 3/31/99 3:32 PM Pacific Standard Time From: Bonzo3 Message-id: <19990331183247.21902.00000555@ng99.aol.com> > Net sales for the third quarter increased 16% to $1.69 billion from $1.45 billion for the comparable period ended March 28, 1998. Comment: Reports of CPU's demise are premature. There are many who still buy brick & mortar and many always will. There are still fully 50% of homes who do not own PC's yet (incredible). Most of these folks will go brick & mortar initially, albeit these sales will be tougher to garner than the first 50%. CPU will sell >$6B of computers and related accessories and services in 1999, brick and mortar is far from dead - just ask Best Buy. > Comparable store sales decreased by 7.2% in the third quarter of fiscal 1999 for the 148 Comment: Herein lies the problem. Its really not one of volume as volume was up significantly at last Q's earnings announcement. Its one of ASP. That is Average Selling Price. The low margin, sub $1000 PC has hurt CPU significantly. Furthermore, OEM's such as Compaq are attempting to copy Dell's direct sales model, actually competing with one of their primary distributors in CPU. IThis does not bode well for CPU. CPU is trying to counter by promoting their higher margin B-T-O (Build To Order) American Line of PC's. They are very price competitive and have been highly rated by industry benchmarks. > Technical Services sales and Training sales for the third quarter were $35.9 million and $30.4 million, respectively, which represent 27% and 24% increases, respectively, from the comparable period a year ago. Comment: Bam!! This is where we start to unlock some of CPU's "hidden value" There are companies who do nothing but provide Computer Training. Mastering Computers comes to mind and they were bought out by a larger company for a handsome premium last year. CPU has excellent technical resources that have yet to be leveraged (both net and Brick) and factored into the current price. > Third quarter sales of CompUSA Net.com Inc., the Company's recently announced Internet and mail order subsidiary, increased 18% to $68.2 million as compared to the same period a year ago. While mail order sales are currently the largest component of CompUSA Net.com's business, total Internet sales for the third quarter increased in excess of 100% from the comparable period a year ago. Comment: Your homework assignment for the evening. Name me one other internet based company who can boast of $68.2M in Q1 sales. Please post here by the end of the trading day tomorrow. The fastest growing component of CompUSA Net.com is of course, the internet business with a >100% increase from last year. Now think for a minute - what will happen when CPU puts its full resources and marketing dollars behind it? You ain't seen nothing yet. Egghead my kiester. > Compared to the third quarter of fiscal 1998, unit sales of desktop and notebook computers increased approximately 20% and 55%, respectively, while average selling prices for each category decreased approximately 15%. Comment: Goes to my point of low ASP's contracting margins, hence lower dollar volume, hence lower same store sales. I see from the release where unit sales have actually increased by 20%. What does this indicate? Traffic. There are people in CPU's stores actually buying computers - I know hard for some of you Net Nuts to believe. Notice the unit increase in Notebooks - Wow. Did you all know that CPU is now manufacturing their own B-T-O Notebooks? Can you say unit volume + higher margins = greater CPU profit? > As a percentage of average sales per store for the existing CompUSA Computer Superstores(SM), average sales per store for the converted Computer City stores improved to approximately 60% in the third quarter of fiscal 1999, compared to approximately 50% in the second quarter of fiscal 1999. Comment: Bottom line here, CPU is improving the shoddy performance of Computer City sequentially. There is still much work to do. The jury is still out as to whether this proves to be a wise purchase - I think it will. Makes me wonder about Tandy and Radio Shack. What a terrible job they did with CC and before that - Incredible Universe. Tandy should stick to selling batteries and portable phones. Whats their stock trading at again? > CompUSA Inc. is one of the nation's leading retailers and resellers of personal computers and related products and services. Comment: And don't you forget that. Apparently many already have. Folks this is simple. CPU's problems are one of tight margins and dollar volume not unit sales. If they can find ways to improve these margins, through additional cost cutting, a boost in their B-T-O business, internet sales growth and new and exciting non-PC products such as Video games (Playstation 2 and Dreamcast are out later this year), Palm Pilots and the like - this stock will return to double digit levels probably sooner than later. There is tremendous underlying value here that is just beginning to be unlocked - as speculative Buys go - this is a tremendous one. Good Luck to all Longs.