EXHIBIT 99.1
BEST PRODUCTS REPORTS FIRST QUARTER RESULTS;
COMPANY REDEFINING STRATEGIC INITIATIVES
RICHMOND, Va., June 18, 1996 -- Best Products Co., Inc. (Nasdaq: BEST) today
reported its 1996 first quarter net sales and operating results. The company
also said that following the arrival of a new chief executive officer in late
April, it has begun to redefine its strategic initiatives for repositioning the
company.
First quarter net sales for the 13 weeks ended May 4, 1996 decreased 1.1% to $
269.8 million compared to $272.8 million for the same period the prior year.
Comparable store net sales decreased 6.4% for the first quarter of 1996. The
company reported a net loss of $1.11 a share for the first quarter of 1996
compared to a net loss of $.25 a share for the same period in 1995.
Gross margin during the first quarter of 1996 was $58.2 million compared to
$66.6 million for the same period in the prior year. First quarter selling,
general and administrative ("SG&A") expenses were $79.8 million this year
compared to $72.2 million in 1995 due to higher payroll and occupancy expenses
resulting from the opening of 15 stores in 1995, primarily during the last
several months of the year.
The company stated that it is taking steps to reduce expenses by approximately
$40 million on an annual basis, but these actions will not begin to be reflected
in operating performance until the second half of fiscal 1996. The company also
indicated that the exiting of certain merchandise categories and an increase in
the mix of promotionally priced sales are expected to result in lower margin
dollars, compared to fiscal 1995, through at least the second quarter of fiscal
1996. As a result, the company anticipates its operating performance will
produce financial results in the second quarter of fiscal 1996 similar to those
of the first quarter.
New Chairman and Chief Executive Officer Daniel H. Levy said, "The factors that
contributed to the company's poor performance in the fourth quarter of 1995 -
poor planning and weak marketing, resulting in sales, margin rate and margin
dollar shortfalls continued to impact Best Products' performance during the
first quarter of 1996. While we are addressing these issues, we anticipate they
will continue to affect results in the near term. Best Products' business
objectives this year are to continue to reduce expenses, to increase margin
dollars and to stabilize our sales performance. We also believe it is paramount
that the company transition to a non-catalog showroom form of retailing, and as
announced earlier this year, we will be making significant changes to our
outdated shopping process this fall. Best Products also has decided not to
launch a broadcast advertising campaign in 1996. Instead, we believe the most
effective way to communicate with our customers at this time is through the
substantially stronger and more aggressive print marketing program we will
implement this fall."
The company said it is progressing with the implementation of many of the
strategic initiatives it announced earlier this year. Best Products has
eliminated its annual fall catalog in favor of a significantly strengthened and
more contemporary-looking print marketing program for the fall. The shopping
experience at Best stores will become more customer friendly with the
installation of a simplified shopping and payment process - including more
self-service merchandise - that replaces the current, out-dated
merchandise-order process. Through the fall Best Products will be exiting
categories such as bicycles, home office electronics, video games, film
processing, automotive electronics, some sporting goods and selected toys,
calculators and music items. The company anticipates replacing the margin
dollars contributed by those exit categories by adding basic domestics such as
pillows and pads, as well as enhancing and emphasizing certain ongoing
merchandise categories.
Levy said, "Best Products has already taken significant steps to reduce
expenses, increase its margin rate and refine its merchandise assortments. We
believe these measures, along with the enhancements to the shopping process,
better execution at the store level and a stronger marketing program, will allow
us to improve operating earnings in 1996 and set the stage for continued
improvement during 1997."
This release contains forward-looking statements that are subject to risks and
uncertainties, including but not limited to risks associated with the
repositioning of the company, its strategic initiatives, and customer and vendor
support for such changes. Additional discussions of factors that could cause
actual results to differ materially from management's projections, forecasts,
estimates, anticipations and expectations is contained in the company's
Securities and Exchange Commission filings.
Best Products, a specialty retailer offering category-dominant assortments of
jewelry and home furnishings, operates 169 Best stores in 23 states.
# # #
BEST PRODUCTS CO., INC.
STATEMENTS OF OPERATIONS
(Unaudited)
Thirteen weeks ended
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May 4, April 29,
1996 1995
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(Dollar amounts in thousands, except per share amounts)
Net sales $ 269,791 $ 272,759
Cost of goods sold 211,610 206,167
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Gross margin 58,181 66,592
Selling, general and administrative expenses 79,777 72,212
Depreciation and amortization 5,503 3,618
Interest expense, net 7,546 4,194
------------ ------------
Loss before income tax benefit (34,645) (13,432)
Income tax benefit -- 5,373
------------ ------------
Net loss $ (34,645) $ (8,059)
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Net loss per common share $ (1.11) $ (0.25)
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Weighted average common shares outstanding 31,342,108 31,660,711
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See accompanying notes to financial statements.
BEST PRODUCTS CO., INC.
BALANCE SHEETS
May 4, February 3,
1996 1996
---------- ----------
(Dollar amounts in thousands)
(Unaudited)
Assets
Current assets:
Cash and cash equivalents $ 9,607 $ 29,003
Merchandise inventories 476,937 481,847
Other current assets 25,628 19,796
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Total current assets 512,172 530,646
Property and equipment, net 174,827 173,239
Other assets, net 10,141 12,755
--------- ---------
Total Assets $ 697,140 $ 716,640
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Liabilities and Stockholders' Equity
Current liabilities:
Short-term borrowings $ 47,926 $ --
Current maturities of long-term debt
and capital lease obligations 22,714 20,895
Accounts payable 107,375 128,834
Accrued expenses and other 44,349 44,426
Accrued insurance 12,105 10,870
Accrued restructuring charges 26,633 28,400
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Total current liabilities 261,102 233,425
Long-term debt 120,206 129,833
Capital lease obligations 80,518 83,312
Other liabilities 14,885 14,996
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Total Liabilities 476,711 461,566
--------- ---------
Stockholders' Equity
Common stock 31,342 31,345
Additional paid-in capital 297,646 297,643
Retained earnings (accumulated deficit) (105,219) (70,574)
--------- ---------
223,769 258,414
Loans under Stock Purchase Loan Plan (3,340) (3,340)
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Total Stockholders' Equity 220,429 255,074
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Total Liabilities and Stockholders' Equity $ 697,140 $ 716,640
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