Guitar Center Ends Year on Up Note, Acquires Retail Chain
Westlake Village, CA-based cataloger/retailer Guitar Center (Nasdaq: GTRC), which mails the Musician’s Friend catalog, reported a 38% rise in fourth-quarter net income and a 72% jump in annual net income.
For the three months ended Dec. 31, Guitar Center netted $27.1 million, compared with $19.7 million for the fourth quarter of 2004. Full-year net income was $63.4 million, up from $36.9 million the previous year.
Fourth-quarter net sales rose 19%, to $468.9 million. Net sales for the year also increased 19%, to $1.51 billion.
Musician’s Friend’s fourth-quarter net sales rose 20%, to $94.4 million. Gross margin was 32%, compared with 33% in the year-ago period, reflecting reduced selling margins due to competitive pressure, partially offset by reduced freight costs. Selling, general, and administrative expenses decreased to 19% from 21% in the comparable period last year due to higher-than-expected sales and operational efficiencies.
In other Guitar Center news, the company is acquiring the privately held Music & Arts Center retail chain. With approximately 60 stores and seven “educational support centers,” Music & Arts sells and rents band and orchestra instruments and offers music lessons. The company’s revenue for fiscal 2004 was roughly $80 million.
School Specialty Sees Higher Loss, Preps New Spin-off
Greenville, WI-based educational supplies giant School Specialty (Nasdaq: SCHS) reported higher quarterly sales but also a wider net loss.
For the three months ended Jan. 22, revenue was $128.1 million, up 20% from $106.6 for the comparable quarter of last year. The net loss increased to $11.2 million from $10.1 million. Included in the loss was a $700,000 restructuring charge related to the ongoing closure of facilities in Agawam, MA, and Tempe, AZ.
During the quarter just ended, School Specialty launched a proprietary product line entitled School Smart, which includes office basics, art supplies, and instructional materials. Next month the company will distribute 40,000 promotional kits containing select School Smart products to educators nationwide.
Later this year, it will introduce a School Smart catalog, which it plans to mail to educators and administrators across the U.S. and Canada. The School Smart line will be offered across all of the School Specialty titles. During the next two years its plans to increase the School Smart line to more than 2,000 products.
School Specialty titles include Classroom Direct, Childcraft, ABC School Supply, Sax Arts & Crafts, Frey Scientific, and Premier Agenda.
Aramark’s Direct Marketing Segment Takes a Hit
Philadelphia-based food services and uniform conglomerate Aramark Corp. (NYSE: RMK) reported record sales for its fiscal first quarter. But sales within its direct marketing division, which mails the WearGuard-Crest and Galls workwear and public-safety equipment catalogs, fell 1%.
For the three months ended Dec. 31, total company sales were $2.73 billion, up 11% from the previous first quarter. Direct marketing sales were $126 million.
Total first-quarter net income climbed 8%, to $72.4 million from $67.4 million last year. Operating income for the direct marketing segment, however, fell 37%, to $8.3 million from $11.4 million. The company blamed the decline on margin erosion at WearGuard-Crest and the ongoing costs of a July 2004 Galls investigation regarding documentation related to shipping and handling in its international business.