Third quarter results show decline in sales, profit for CSK Auto

Jan. 1, 2020
CSK Auto Corporation's preliminary third quarter 2007 results showed a decline in net sales, same store sales and same store retail sales. Same store commercial sales increased, but not even that is good news for the specialty retailer — becaus

CSK Auto Corporation's preliminary third quarter 2007 results showed a decline in net sales, same store sales and same store retail sales. Same store commercial sales increased, but not even that is good news for the specialty retailer — because commercial transactions carry a lower gross profit percentage than retail sales, the company's overall gross profit took a downturn for the quarter.

Net sales for the 13 weeks ended Nov. 4, 2007 decreased 2.4 percent to $471.4 million compared to $483.1 million for the 13 weeks ended Oct. 29, 2006. Same store sales for the third quarter of fiscal 2007 decreased 3.0 percent over the third quarter of fiscal 2006, with same store retail sales declining 4.8 percent and same store commercial sales increasing 5.4 percent. Same store sales declined in the third quarter of fiscal 2007 primarily due to a decline in transaction count (measured by the number of in-store transactions), which was partially offset by an increase in the average transaction size (measured by dollars spent per sale).

Net sales for the 39 weeks ended Nov. 4, 2007 decreased 0.8 percent to $1,424.6 million compared to $1,435.6 million for the 39 weeks ended Oct. 29, 2006. Same store sales for the 39 weeks of fiscal 2007 declined 2.4 percent compared to the 39 weeks of fiscal 2006, with same store retail sales declining 4.3 percent and same store commercial sales increasing 6.6 percent. The decline in net sales that the company experienced in the third quarter of fiscal 2007 was the primary contributor to the 39 week decrease in net sales.

Gross profit decreased $12.3 million to $214.6 million, or 45.5 percent of net sales, for the third quarter of fiscal 2007 compared to $226.9 million, or 47.0 percent of net sales, for the third quarter of fiscal 2006. The decrease in gross profit dollars was the result of the decline in sales as well as a decline in the gross profit percentage. The decrease in gross profit percentage was caused by a number of factors including sales mix and a higher level of clearance activity for the third quarter of fiscal 2007 compared to the third quarter of fiscal 2006, as well as an increase in commercial sales, which carry lower gross profit percentages than retail sales.

Gross profit decreased $9.1 million to $665.5 million or 46.7 percent of net sales, for the 39 weeks of fiscal 2007 compared to $674.6 million, or 47.0 percent of net sales, for the 39 weeks of fiscal 2006. The decrease in gross profit dollars was primarily the result of the decline in sales during the third quarter. The decrease in gross profit percentage for the thirty-nine weeks ended Nov. 4, 2007 was primarily due to the factors discussed above that impacted the third quarter of fiscal 2007.

Operating and administrative expenses for the third quarter of fiscal 2007 were $207.4 million, or 44.0 percent of net sales, compared to $201.1 million, or 41.6 percent of net sales, for the third quarter of fiscal 2006. Operating and administrative expenses for the quarter increased $6.3 million, $3.8 million of which was attributable to severance pay associated with the personnel reductions and fixed asset impairment costs incurred relative to the planned closure of 40 stores in fiscal 2008 associated with the company's recently initiated strategic plan, and reserves for various regulatory compliance matters. Also, operating and administrative expenses for the quarter increased as a result of expenses associated with the 30 net new stores added from Oct. 29, 2006 through Nov. 4, 2007.

Operating and administrative expenses for the 39 weeks of fiscal 2007 were $610.9 million, or 42.9 percent of net sales, compared to $582.8 million or 40.6 percent of net sales for the 39 weeks of fiscal 2006. CSK's operating and administrative expenses increased $28.1 million for the 39 weeks of 2007 primarily as a result of expenses associated with additional stores and inflationary cost increases at existing stores for such items as increased rent and other occupancy-related costs.

Interest expense for the third quarter of fiscal 2007 was $13.2 million, compared to $13.3 million in the third quarter of fiscal 2006. Interest expense for the 39 weeks of fiscal 2007 was $39.7 million compared to $34.6 million in the 39 weeks of fiscal 2006. The interest expense increase during the 39 weeks of fiscal 2007 reflected the full impact of the refinancing that was completed in the second quarter of fiscal 2006, which resulted in increased interest rates on most of the company's debt.

The net loss for the third quarter of fiscal 2007 was $5.8 million, or a net loss of $0.13 per diluted common share, compared to net income of $3.2 million, or $0.07 per diluted common share, for the third quarter of fiscal 2006.

Net income decreased for the 39 weeks of fiscal 2007 to $1.1 million, or $0.03 per diluted common share, compared to net income of $7.5 million or $0.17 per diluted common share, for the 39 weeks of fiscal 2006.

For more information about CSK Auto, Inc., visit the company's Web site.