Streamlines Operations, Eliminates Unprofitable Lines of Business,
Emphasizes Digital and High-Tech Consumer Entertainment Electronics
SAN FRANCISCO, July 26 /PRNewswire/ -- The Good Guys! (Nasdaq: GGUY) today
announced financial results for the third quarter and first nine months of
fiscal year 1999, and unveiled its business strategy for returning the company
to profitability.
The company reported a net loss of $8.1 million, or a $.54 loss per share,
for the third quarter ended June 30, 1999, compared with a net loss of
$2.6 million, or a $.18 loss per share, for the same period last year.
As previously reported, sales for the third fiscal quarter were
$210.5 million, up one percent from $209.1 million in the third quarter of
fiscal year 1998. Comparable store sales for the quarter decreased
two percent.
For the nine months, the net loss was $13.7 million, or a $.94 loss per
share, compared to a net loss of $2.2 million, or a $.16 loss per share, the
year before.
Sales for the first nine months of fiscal 1999 were $723.7 million, a
two percent increase from the $708.4 million reported for the same period last
year.
"We are taking immediate steps to improve our financial performance," said
Ron Unkefer, founder, chairman and chief executive officer of The Good Guys!,
who rejoined the company on July 1, 1999. "We are aggressively reducing our
operating costs and eliminating unprofitable lines of business while shifting
our product focus to reflect our core competency -- digital and high-tech
consumer entertainment electronics."
Exiting Computer Business, Expanding Communications and Internet Services
Offerings
A major step towards sharpening the company's focus and improving profit
margins will be the elimination of computers and home office products from The
Good Guys!' overall product mix by the end of this quarter.
"The expected synergy from computer sales and entertainment electronics
sales has not materialized," said Unkefer. "Minuscule computer industry
margins, quick obsolescence of inventory and unique service challenges have
collectively made this category a financial drain on the company."
The Good Guys! will redeploy its energies and retail space in part to
expand its successful wireless phone division and create a department that
will showcase new technology and Internet-related products and services,
including digital cable set top boxes, broadband service and Internet
appliances.
"Our most loyal and profitable customers demand 'high-tech, high-touch'
products that are hard to find in the national chains," said Unkefer. "We
hope to work closely with our existing vendors, as well as emerging technology
companies, to ensure that our stores offer the most advanced products on the
market."
Unkefer also said the company would look for opportunities to conduct
select market tests, customer evaluations, limited roll-outs and first phase
distribution for new and innovative technology products and services.
Reducing Overhead, Streamlining Operations
Unkefer also outlined plans to reduce general and administrative costs by
nearly 20 percent, or approximately $8 million. The initiative is already
under way and focuses on streamlining all corporate functions, including
operations, management information systems, finance, human resources and
merchandising.
Under the new structure, two vice president positions have been
eliminated, the real estate department has been closed and facilities
management has been consolidated under operations.
After a performance review of all locations, the company has decided not
to close any of its retail stores. "Of our 79 stores, 78 make a contribution
to operating profits (before allocation of corporate overhead) and the one
exception is expected to begin contributing in the next few months," said
Unkefer. "One of our key strengths is the efficiency of our marketing channel
-- all sales are concentrated in the four West Coast states, where we have
stores in virtually every market with 250,000 or more people."
Unkefer also said that the company has canceled all plans for additional
store remodels and relocations and will not open any new locations until the
company is again operating profitably.
During this fiscal year, The Good Guys! opened two new locations and
relocated or remodeled seven locations. The lost sales and substantial
inefficiencies associated with these upgrades contributed significantly to
this year's losses, but these stores should help drive sales in the coming
year, Unkefer said.
"By concentrating on existing locations, streamlining our operations and
returning to our successful core business, we will revitalize The Good Guys!
brand, clarify our market differentiation and strengthen our position in the
marketplace," said Unkefer.
Enhancing The Good Guys! Brand
Unkefer announced plans to increase the company's advertising and
marketing budget by more than 20 percent. San Francisco-based advertising
agency Citron Haligman Bedecarre has agreed to take an equity interest in The
Good Guys! and will develop the company's new integrated branding and
marketing campaign. The campaign will convey The Good Guys! commitment to
providing early adopters, product savvy consumers and middle and upper income
customers a distinctive selection of entertainment electronics products and
services. "We're going to articulate a compelling and differentiated position
and super-serve this important, profitable market niche," said Unkefer.
Getting Back On Track
Unkefer reported that the company expects that the actions being taken
will lead to restructuring charges in the fourth quarter. While aggressive
actions are being taken to cut costs and improve performance, Unkefer
cautioned that the impact on financial results would not be immediate.
"We aren't looking for an improvement in our financial performance in the
fourth quarter, but are encouraged that our plan should return us to
profitability during fiscal 2000," Unkefer said.
The company's projections for same store sales increases are consistent
with current market trends, based on recent actual category margins and the
increase in sales expected from the enhanced advertising and marketing effort.
Unkefer also noted that the reduction in operational costs coupled with
the change in product mix should make the company cash flow positive in
fiscal 2000, even if same-store sales are flat.
"Our three-year goal is to return to profitability in the upcoming fiscal
year, meet or exceed industry average earnings in year two, and by year three
be recognized as the best run consumer entertainment electronics specialty
retailer in the world," said Unkefer.
About The Good Guys!
Earlier this month, Unkefer, who founded The Good Guys! in 1973, rejoined
the company as chairman and CEO. During his previous tenure as chairman and
CEO (1973-1993), Unkefer had a proven track record of achieving profitable
results, including taking the company public in 1986 and establishing The Good
Guys! as one of the nation's pre-eminent providers of consumer electronics.
The Good Guys! is a leading specialty retailer of consumer entertainment
electronics, operating a total of 79 stores in California, Washington, Oregon
and Nevada, and marketing a broad range of high quality, name brand products.
For more information on The Good Guys!, including news releases, product
information and store locations, visit http://www.thegoodguys.com.
To the extent this news release contains forward-looking statements, such
statements are subject to risks and uncertainties, including, but not limited
to, 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.
The Good Guys, Inc.
SELECTED FINANCIAL DATA
(Unaudited)
Three Months Ended June 30: 1999 1998
Sales $210,451,000 $209,057,000
Net Loss $(8,131,000) $(2,591,000)
Net Loss Per Share
Basic (.54) (.18)
Diluted (.54) (.18)
Average Shares
Basic 15,103,000 14,086,000
Diluted 15,103,000 14,086,000
Nine Months Ended June 30: 1999 1998
Sales $723,649,000 $708,422,000
Net Income (Loss) $(13,726,000) $(2,182,000)
Net Income (Loss) Per Share
Basic (.94) (.16)
Diluted (.94) (.16)
Average Shares
Basic 14,620,000 13,932,000
Diluted 14,620,000 13,932,000
The Good Guys, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in thousands
except per share data) Three Months Ended
June 30, 1999 June 30, 1998
% of % of
Amount Sales Amount Sales
Net sales $210,451 100.0 $209,057 100.0
Cost of sales 155,811 74.0 155,792 74.5
Gross profit 54,640 26.0 53,265 25.5
Selling, general and
administrative expenses 61,566 29.3 57,103 27.3
Income (loss)
from operations (6,926) (3.3) (3,838) (1.8)
Interest expense, net 1,205 (0.6) 252 (0.1)
Income (loss) before
income taxes (8,131) (3.9) (4,090) (2.0)
Income tax expense
(benefit) 0 0.0 (1,499) (0.7)
Net income (loss) $(8,131) (3.9) $(2,591) (1.2)
Net income (loss) per common share
Basic and Diluted: $(0.54) $(0.18)
Weighted average shares
Basic and Diluted: 15,103 14,086
The Good Guys, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(Amounts in thousands
except per share data) Nine Months Ended
June 30, 1999 June 30, 1998
% of % of
Amount Sales Amount Sales
Net sales $723,649 100.0 $708,422 100.0
Cost of sales 545,617 75.4 531,204 75.0
Gross profit 178,032 24.6 177,218 25.0
Selling, general and
administrative expenses 189,302 26.2 179,913 25.4
Income (loss)
from operations (11,270) (1.6) (2,695) (0.4)
Interest expense, net 2,459 (0.3) 747 (0.1)
Income (loss) before
income taxes (13,729) (1.9) (3,442) (0.5)
Income tax expense
(benefit) 0 0.0 (1,260) (0.2)
Net income (loss) $(13,729) (1.9) $(2,182) (0.3)
Net income (loss) per common share
Basic and Diluted: $(0.94) $(0.16)
Weighted average shares
Basic and Diluted: 14,620 13,932
The Good Guys, Inc.
CONSOLIDATED BALANCE SHEET
(Unaudited)
(Amounts in thousands) June 30, 1999 June 30, 1998
ASSETS
Current Assets:
Cash $10,176 $8,469
Receivables, net 23,560 33,953
Inventories 135,697 150,575
Prepaid Assets 7,138 6,350
Total Current Assets 176,571 199,347
Property and equipment, net 80,651 65,869
Other assets 7,162 1,697
Total Assets $264,384 $266,913
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
Accounts payable $68,486 $100,589
Accrued expenses 35,777 40,593
Total Current Liabilities 104,266 141,182
Revolving Credit Debt 55,708 7,957
Shareholders' equity 104,413 117,774
Total Liabilities and Shareholders' Equity $264,384 $266,913
SOURCE The Good Guys, Inc.
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Related links:
http://www.thegoodguys.com
Company News On-Call:
http://www.prnewswire.com/comp/108403.html or fax,
800-758-5804, ext. 108403
CONTACT:
Kristen Malacarne, 214-665-1335, pager
888-613-2159, for The Good Guys, Inc.
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