Relocation Costs Widen Egghead Software Loss
A third of Egghead Software’s $3.2 million loss in the first quarter of its 1996 fiscal year is attributed to relocation of some operations from Issaquah and Kalispell, Mont., to Spokane.
The software retailer said Thursday the costs of moving its direct response operation and customer service and credit operations to Spokane in May totaled $1.1 million.
And, the company’s quarterly financial report stated, additional costs associated with moving the company’s corporate headquarters from Issaquah to Spokane during the rest of the year will weigh heavily on the fiscal 1996 bottom line.
“Relocation, severance, and related costs, which are estimated at approximately $3 million, will be included in the company’s results through the remainder of fiscal year 1996,” the report states. “The company expects that these changes will result in net expense in fiscal year 1996, and net savings in future years due to lower labor rates and occupancy costs.”
During the quarter ended July 1, Egghead reported a loss of $3.2 million, or 18 cents per share, on sales of $174.6 million. That compares with a loss of $1.1 million, or 6 cents per share, on sales of $193.8 million during the year-ago quarter.
The company’s direct sales division - representing sales to corporate, government and education customers - produced sales of $89.9 million during the quarter, compared with $102.6 million a year earlier.
Most of the decreases, the report says, are due to market-imposed price reductions.
“Prices for many software products have continued to decline due to industry-wide pricing pressure related to both competitors’ and vendors’ pricing,” the report states.
Retail sales of $84.7 million in the first quarter were down $6.5 million from the $91.2 million in sales for the quarter a year ago.
Egghead was operating 18 fewer stores at the end of the first quarter this year than it was at the end of the first quarter of fiscal 1995.