TWEETER REMAINS CAUTIOUS ON 2ND-HALF RESULTS
Despite new marketing initiatives that have yielded positive preliminary results, Tweeter Home Entertainment still expected to report somewhat disappointing results for back half of year, including 3rd quarter ended June 30, CFO Joseph McGuire told CIBC World Markets investor conference in Boston Wed.
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Earlier this month, company said it expected to post 17? loss in 3rd quarter, meaning earnings would fall short of analysts’ expectations for 3rd consecutive quarter (CED July 7 p4). Analysts had been expecting 13? loss. Company is set to announce actual results July 24.
McGuire told conference that company now expected its comparable-store sales would be “somewhere between down 8 and 12” cents for year. Result, he said, will be “very dependent upon what happens with the September quarter.” He said company opened 12 stores in fiscal 2003 instead of 20 it had planned, cutting number “as much as we could” and said there would be “very little [new] store activity in the coming year.”
Company initiated new marketing strategy over Memorial Day weekend, McGuire said. Tweeter also began testing print insert strategy in April and May. He said “both of those tests were positive” but company needed additional months of data truly to gauge effectiveness of changes in its main goal, which is to attract additional customers into its stores. “Early indications from June are that we will have finished the month with more customers than we started.” By March, he said, company had “successfully worked down” excess inventory from Dec. high.
Echoing comments by CEO Jeffrey Stone earlier this month, McGuire said “we think we actually shot ourselves in the foot in both Florida and Arizona” in June when it started national marketing strategy. That strategy, he said, “was beneficial to all the other regions of the country but actually was harmful in Florida and Arizona, where we actually hurt sales.” He said “gross margins did go up in both regions about 140 basis points in those markets.” But he said “that wasn’t enough to make up for the decline in sales.” Shift in marketing strategy, he said, ended up costing company $1.5 million. In July, he said, “we will put back some of those discounts and put back some of those promotional items” that were killed. But he said goal still was to “get to one national strategy” on long-term basis.
Positives for Tweeter, McGuire said, included that “digital and digital-related products continue to be a very important [factor] within our industry and we continue to be a leader there.” He said “there are many new products lined up that complement and augment HDTV.” Meanwhile, he said, flat-panel displays continued to be strong category despite high price points of many of those products.
In late afternoon trading Wed., Tweeter stock was down 19? (2.35%) at $7.90. Stock had tumbled 15.9% to $8.07 before holiday weekend after retailer reported that 3rd-quarter earnings would disappoint.