Financial Reports: Amazon, Schein, Zones, and More

Tax Expense Lowers Amazon Income
A higher tax expense cut into second-quarter net income at Seattle-based online behemoth (Nasdaq: AMZN).

Net income plunged 32%, to $52 million for the three months ended June 30, compared with $76 million for the comparable quarter of last year. This year’s net income includes $56 million in income tax expense, whereas last year tax expense totaled $5 million.

Net sales, however, increased 26%, to $1.75 from $1.39 billion a year ago. Excluding the $25 million benefit from year-over-year changes in foreign exchange rates throughout the quarter, net sales increased 25%.

North America sales rose 21%, to $960 million. Operating income for the segment increased 9%, to $72 million. Worldwide sales of electronics and other general merchandise grew 40%, to $456 million, and increased to 26% of worldwide net sales, compared with 23% the previous second quarter.

Red Ink for OfficeMax
Itasca, IL-based cataloger/retailer OfficeMax (NYSE: OMX) posted a second-quarter net loss and lower sales thanks to slipping retail results and the October sales of its paper, forest products, and timberland assets.

Overall revenue tumbled 38%, to $2.1 billion. Excluding last year’s revenue from the sold businesses, however, sales rose 4%. A 10% increase in contract division sales offset a 1% drop in retail sales.

During the quarter the company lost $21.5 million, compared with net income of $51.1 million for the second quarter of last year. This year’s results include special items, including a loss from discontinued operations, that are not expected to be ongoing.

Sales, Income Up at Schein
Melville, NY-based medical, dental, and veterinary supplier Henry Schein (NasdaqNM: HSIC) continues to churn out top- and bottom-line gains.

Second-quarter net sales increased 21%, to $1.14 billion for the three months ended June 25. This increase includes 19% local currency growth and 1.6% related to foreign currency exchange. Net income increased 3%, to $40.0 million.

For the quarter, dental sales increased 19%, including 18% growth in local currencies. Dental consumable merchandise sales increased 15.5% (8% internal growth, 7% acquisition growth), and sales from dental equipment and services rose 29%.

Combined medical/veterinary revenue declined 3%, as the company continues to eliminate less profitable pharmaceutical and veterinary sales. International sales increased 71%, including 64% growth in local currencies.

Higher AOV Leads to Sales Gains at Zones
Auburn, WA-based computer reseller Zones (Nasdaq: ZONS) posted a 3% rise in second-quarter net sales, despite a 2%decline in volume. Thanks to an 8% increase in average order value, to $1,340, sales for the three months ended June 30 were $127.6 million, compared with $124.0 million for the comparable period of last year. Net income rose 8%, to $1.3 million from $1.2 million last year.

Outbound telemarketing sales increased 8%, to $122.7 million. Revenue from online orders jumped 118%, to $21.3 million.

Sales Up at Musician’s Friend
Medford, OR-based Musician’s Friend, part of retailer Guitar Center (Nassdaq: GTRC), enjoyed a 14% rise in second-quarter sales. Direct response net sales were $78.0 million, up from $68.2 million a year ago.

Gross margin for Musician’s Friend was 32%, compared with 34% the previous second quarter, reflecting increased competitive pressure partially offset by reduced freight costs. Selling, general and administrative expenses for the second quarter were 21.8% of net sales, compared with 21.4% last year, due to planned increases in advertising expenses.

Total net sales for Westlake Village, CA-based Guitar Center were $402.3 million, up 19% from the second quarter of 2004. Consolidated net income increased 6%, to $12.9 million.

Sales Up at Celebrate Express
Kirkland, WA-based party products and children’s apparel merchant Celebrate Express (Nasdaq: BDAY) had cause to celebrate: Annual sales rose 33%, to $69.1 million for the fiscal year that ended May 31, compared with $51.9 million the previous year.

Net income for the year was $2.5 million, down from last year’s $9.5 million. But the company says that net income for fiscal years 2005 and 2004 are not comparable as a result of the accounting for income taxes; net income for the fiscal year just ended included income tax expense of $1.5 million.

During fiscal 2005 the company acquired roughly 415,000 new customers. Orders from repeat customers accounted for about 51% of revenue. Celebrate Express mails the Birthday Express, Costume Express, and Storybook Heirlooms catalogs.

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