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SERVICE MERCHANDISE COMPANY ANNOUNCES SALES AND EARNINGS

 NASHVILLE, Tenn., July 13 /PRNewswire/ -- Service Merchandise Company (NYSE: SME) today announced sales and earnings for the second quarter ended June 30, 1993.
 Second Quarter Ended June 30, 1993
 Net sales for the second quarter of 1993 were $803,112,000 compared to $781,497,000 for the second quarter of 1992, an increase of $21,615,000 or 2.8 percent. Comparable store sales increased .7 percent for the quarter. The company has added a net of 10 new stores since the second quarter of 1992.
 The net earnings for the three months ended June 30, 1993, were $8,420,000, or $.08 per share, compared to net earnings of $6,035,000, or $.06 per share, for the same quarter last year. The increase in net earnings of $2,385,000, or 39.5 percent, was primarily a result of increased sales, improved gross margin and reduced interest expense, partially offset by increased selling, general and administrative expenses.
 Gross margin for the second quarter of 1993, after taking into account buying and occupancy expense, was $201,429,000 as compared to $187,982,000 for the same quarter last year, an increase of $13,447,000. As a percentage of net sales, gross margin, after taking into account buying and occupancy expense was 25.1 percent as compared to 24.1 percent for the second quarter of 1992. The increase in the margin rate reflected an increase in jewelry sales as a percentage of total sales, along with an improvement in gross margin rate for hardlines merchandise.
 Selling, general and administrative expenses increased to $155,999,000, or 19.4 percent of net sales, for the second quarter of 1993 as compared to $142,137,000, or 18.2 percent of net sales, for the same quarter a year ago. The primary reason for the increase was a planned increase in both the amount and circulation of advertising for the quarter.
 Interest expense on debt and capitalized leases decreased by $4,430,000, or 19.6 percent, as compared to the second quarter of 1992. The lower interest expense was a result of refinancing $300 million of senior subordinated debt completed in the first quarter and successful renegotiation of lower rates on the company's $475 million Revolving Credit Facility and $157 million Term Loan. An increase in short-term borrowings partially offset the favorable effect of the lower rates.
 Sales for the six months ended June 30, 1993, were $1,475,975,000, an increase of 2.1 percent over sales of $1,446,151,000 a year ago. The six months ended June 30, 1993, had five less selling days as compared to the same period last year due to differences in fiscal year ends and leap year in 1992. Adjusted for the five less selling days, comparable store sales increased 1.6 percent for the first six months of 1993.
 The net loss for the six month period ended June 30, 1993, was $2,293,000 or $.02 per share, compared to a net loss of $3,356,000, or $.03 per share, for the same period a year ago.
 Raymond Zimmerman, president and chairman of the board, stated: "Considering the continued slow economic recovery in the second quarter, we are pleased to be able to report increases in sales, gross margin and net earnings in comparison to the same quarter of 1992. This quarter also reflected completion of a full year of our more aggressive pricing strategy, and margin rates have stabilized in relation to the prior year. We continue to see the favorable impact on net earnings from the first quarter refinancing of our senior subordinated debt and renegotiation of senior bank debt terms. These activities have enhanced our already strong financial position and give us a firm financial foundation for the remainder of the year. Additionally, during the second half of 1993, we look forward to opening a net 17 new stores, as compared to 9 during the same period last year. The increased pace of store openings will improve our sales growth in future quarters."
 Service Merchandise Company, Inc., "America's Leading Jeweler," operates 372 Service Merchandise stores and two Kids Central USA stores in 37 states.
 SERVICE MERCHANDISE COMPANY, INC. (N)
 (in thousands except per share data)
 Three Months Ended Six Months Ended
 6/30/93 6/30/92 6/30/93 6/30/92
 Net sales $803,112 $781,497 $1,475,975 $1,446,151
 Earnings (loss) before
 extraordinary loss and
 cumulative effect of
 change in accounting
 principle $8,420 $6,035 ($2,437) ($3,356)
 Extraordinary loss from
 early extinguishment of
 debt, net of tax benefit
 of $4,858 --- --- ($7,598) ---
 Cumulative effect of change
 in accounting principle --- --- $7,742 ---
 Net earnings (loss) $8,420 $6,035 ($2,293) ($3,356)
 Per common share: (A)
 Earnings (loss) before
 extraordinary loss and
 cumulative effect of
 change in accounting
 principle $0.08 $0.06 ($0.03) ($0.03)
 Extraordinary loss from
 early extinguishment of
 debt, net of tax benefit --- --- ($0.07) ---
 Cumulative effect of change
 in accounting principle --- --- $0.08 ---
 Earnings (loss) per common
 share $0.08 $0.06 ($0.02) ($0.03)
 Weighted average common
 shares and common share
 equivalents
 outstanding (A) 102,053 101,749 102,107 101,441
 Comparable store net
 sales increase (B) 0.7pct. 1.6pct.
 (A) All 1992 per share data has been restated to reflect the three-
 for-two common stock split effected in the form of a 50 percent
 stock dividend in May 1992.
 (B) Adjusted to reflect comparable number of selling days.
 -0- 7/13/93
 /CONTACT: Sam Cusano, Corporate Vice President and Chief Financial Officer, Service Merchandise Company, 615-660-3200/
 (SME)


CO: Service Merchandise Company, Inc. ST: Tennessee IN: REA SU: EARN

CM-SB -- CH010 -- 1024 07/13/93 16:19 EDT
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Date:Jul 13, 1993
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