Focus Shifts from Cost-Cutting to Improving Sales and Customer Service
SAN FRANCISCO, April 6 /PRNewswire/ -- Good Guys (Nasdaq: GGUY), a leading
specialty retailer of consumer entertainment electronics, today announced
sales for the second fiscal quarter ended March 31 and outlined plans to boost
sales and improve customer service after eliminating more than $24 million in
annual operating expenses.
Second quarter sales were $190.4 million compared to $219.1 million in the
second quarter of fiscal year 1999. Sales for continuing categories decreased
approximately 1 percent from the same period last year and same store sales
for continuing categories remained the same. For the first six months of
fiscal 2000, sales were $452.6 million compared to $513.2 million for the
year-ago period with sales for continuing categories remaining the same and
same store sales for continuing categories decreasing 1 percent.
The decline in sales was due primarily to the discontinuation of computers
and home office products during fiscal 1999. In addition, sales for March
were impacted by the physical disruption of the reorganization of the
company's in-store operations and merchandise categories. The reorganization,
which eliminated the stand-alone personal electronics department and its
entry-level staff by redistributing most of the products into the audio, video
and mobile electronics departments, will improve customer service and reduce
costs by an additional $9 million annually. As a result of the changes, Good
Guys' in-store structure is now similar to the most profitable specialty
retailers in the consumer electronics industry.
"We are clearly disappointed by the sales decline for the quarter, but are
confident that the disruptive but necessary steps that were taken will
translate into a more effective sales organization and will bolster our
efforts to improve our financial performance during the second half of the
year," said Ronald A. Unkefer, founder, chairman and chief executive officer,
Good Guys. "With the upcoming third quarter serving as a transitional period,
we expect to finish the fiscal year with a strong fourth quarter and to begin
building on the solid foundation created by these decisive moves."
Two key indicators -- extended service contract penetration and inventory
turns on continuing categories -- increased from year-ago figures and the
gross margin for the quarter is expected to top 29 percent, a five-point
increase from the year-ago period.
The company also reported that it anticipates a pre-tax loss of
approximately $10 million for the quarter, which includes a restructuring
charge of approximately $300,000 for severances packages, compared to a
pre-tax loss of $8.2 million for the same period last year.
For the first six months of fiscal 2000, the net loss is expected to be
less than the $5.6 million loss recorded in the year-prior period and earnings
before interest, taxes, depreciation and amortization (EBITDA) are expected to
be positive. As a result, a transitional third quarter followed by a strong
fourth quarter would allow the company to be profitable in the current fiscal
year and dramatically improve its financial performance from the year-ago
period. More importantly, the reorganization that took place during the
second quarter has allowed the company to develop a business plan for fiscal
2001 that projects industry average profitability at current margins and
single-digit same store sales increases. Furthermore, with the lowered cost
structure Good Guys could operate profitably in fiscal 2001 at current margins
even without an increase in same store sales.
"The past nine months have been among the most challenging of Good Guys'
26-year history, but we believe that the tremendous progress we have made from
both an operational and merchandising standpoint provides the foundation for
growing sales throughout the organization," said Unkefer. "Our priorities for
the next six months will be to significantly enhance the total shopping
experience, to improve sales performance and to better communicate our value
proposition."
As of April 1, Good Guys has reintroduced cashiers to handle basic
transactions, enabling customers to quickly purchase basic products and
accessories and allowing trained sales counselors to focus on assisting
customers with product selections and improving overall service. Many
entry-level sales positions have been eliminated and sales managers now have
greater responsibility for serving customers and overseeing regular product
training seminars. In addition, all new salespeople will undergo a two-week
intensive training program followed by daily in-store product and sales
instruction. Demonstrating expert product knowledge and providing reliable
recommendations will continue to be core criteria for evaluating individual
performance.
As part of the previously announced restructuring, Good Guys has
outsourced its day-to-day advertising operations to leverage external
expertise and resources and to enhance the effectiveness of its advertising.
In addition to emphasizing Good Guys' distinctive selection of digital and
high-tech consumer entertainment electronics, the ongoing print and direct
mail campaign will also begin to communicate more aggressive pricing and
promotions.
This improved advertising effort combined with the restructuring of the
in-store format and staffing structure is expected to impact sales by more
effectively communicating and demonstrating Good Guys' differentiation in
product selection, price and overall customer service.
Since the introduction of Good Guys' business strategy for returning to
profitability last July, the company has reduced operating costs by more than
$24 million, eliminated unprofitable lines of business and shifted its product
focus to reflect its emphasis on mid to high-end consumer entertainment
electronics. Currently, over half of Good Guys' product offerings are not
available at the company's two largest competitors and that differentiation is
planned to expand to 75 percent by fiscal 2001.
"With the second quarter behind us and the mechanisms in place to
effectively manage our operating costs and to maximize the sales opportunities
in our stores, we are confident that we can increase our market share and
achieve sales growth consistent with the current and expected explosion in the
consumer electronics industry," said Unkefer. "I am personally confident that
we will have a profitable fourth quarter and return to profitability this
fiscal year."
Good Guys is a leading specialty retailer of consumer entertainment
electronics, offering a distinctive selection of fully featured digital and
high-tech products from more than 100 of the world's most respected
manufacturers. Founded in 1973, Good Guys currently operates 79 stores in
California, Nevada, Oregon and Washington.
To the extent this news release contains forward-looking statements, such
statements are subject to risks and uncertainties, including, but not limited
to, the successful implementation of the Company's current restructuring
program, increases in promotional activities of competitors, changes in
consumer buying attitudes, the presence or absence of new products or product
features in the Company's merchandise categories, changes in vendor support
for advertising and promotional programs, changes in the Company's merchandise
sales mix, and economic conditions.
SOURCE Good Guys
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http://www.thegoodguys.com
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http://www.prnewswire.com/comp/108403.html or fax,
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CONTACT:
Kristen Lark of Good Guys, 214-220-2484, or
klark@goodguys.com
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