New In-Store Structure, Revamped Advertising Lead to Strong Sales
Of Continuing Product Categories; Company Revises Annual Projections
SAN FRANCISCO, July 10 /PRNewswire/ -- Good Guys (Nasdaq: GGUY), the
nation's second-largest specialty retailer of consumer entertainment
electronics, today announced that its new in-store structure and enhanced
advertising campaign led to a 4 percent increase in sales for continuing
categories and a 3 percent increase in comparable store sales for continuing
categories for the third quarter ended June 30.
Total sales for the third quarter were $195.9 million compared to
$210.5 million in the third quarter of fiscal year 1999. As expected, there
was a decline in overall sales due to the elimination of low-margin computers
and home office products and the de-emphasis of entry-level offerings. Sales
for the quarter improved month-to-month, with sales for June achieving the
highest levels of gross margin and comparable store sales for continuing
categories since 1994.
"These results confirm that the disruptive but necessary steps we took
during the second quarter to more effectively manage our operating costs and
to maximize sales opportunities in our stores are already having a positive
impact," said Ronald A. Unkefer, chairman and CEO, Good Guys. "While April
was a transitional month, sales for continuing categories made a solid upswing
during May and June, and we expect to continue building on this momentum as we
enter the final quarter of our fiscal year."
Sales of digital products, including high-definition televisions, digital
cameras and camcorders and DVD players, contributed to the increase in sales
for continuing categories. In addition, Good Guys' renewed emphasis on mid to
high-end consumer entertainment electronics is expected to allow the company
to achieve a gross margin of more than 28.5 percent for the quarter compared
to 26.0 percent for the same period last year, with extended service contract
penetration and inventory turns on continuing categories also improving over
last year's figures.
For the first nine months of fiscal 2000, sales were $648.5 million
compared to $723.7 million for the year-ago period, with comparable store
sales for continuing categories remaining the same and sales for continuing
categories increasing 1 percent.
New In-Store Structure, Revamped Advertising
Effective April 1, Good Guys reorganized the company's in-store operations
and merchandise categories to reduce costs by approximately $9 million
annually and improve the level of service at its 79 stores. The
reorganization 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.
During the third quarter, Good Guys introduced an enhanced advertising
campaign designed to drive qualified customers to the company's stores through
expanded placement as well as promotions and other incentives. By outsourcing
its advertising department to a retail agency and renegotiating rates with
more than 30 newspapers, Good Guys increased the frequency and broadened the
placement of its print advertising within its existing budget. In addition,
Good Guys resumed television advertising in June and will continue running
television ads for the remainder of the year.
"This improved advertising effort combined with the restructuring of the
in-store format and staffing structure will continue to play a pivotal role in
bolstering our sales performance by more effectively communicating and
demonstrating Good Guys' differentiation in product selection, price and
overall customer service," said Unkefer. "Now that we have the right product
mix, the right in-store format and the right advertising support, I am
confident that we can increase our market share and continue achieving
sizeable increases in same store sales."
Financial Performance
Good Guys expects to report a loss for the quarter that is substantially
lower than the $8.1 million loss for the same period last year. With the
anticipated loss, the company no longer expects to be profitable for fiscal
2000; however, earnings before interest, taxes, depreciation and amortization
(EBITDA) are still expected to be positive for both the quarter and the year.
"While we have made tremendous progress over the past nine months and the
third quarter in particular, we have adjusted our expectations for the year to
fully account for the initial disruption of the in-store reorganization and
the impact of a more promotional sales effort," said Unkefer. "However, we
remain confident that both our annual EBITDA and cash flow will be positive
for the first time in five years and that we will achieve solid sales
increases in future quarters. Furthermore, we expect the changes we made
during March and April to lead us to profitability in fiscal 2001 and bolster
our prospects for sustainable, long-term profitability in the years that
follow."
Good Guys will issue third-quarter financial results on July 25.
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.
For more information, contact: Kristen Lark of Good Guys, 214-220-2484,
klark@goodguys.com.
SOURCE Good Guys
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http://www.thegoodguys.com
Company News On-Call:
http://www.prnewswire.com/comp/108403.html or fax,
800-758-5804, ext. 108403
CONTACT:
Kristen Lark of Good Guys, 214-220-2484,
klark@goodguys.com
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