Egghead Relocation Causes Loss Disappointing Holiday Sales Contribute To Quarterly Loss

Egghead Software suffered losses during the third quarter of fiscal 1996 that can be largely attributed to disruptions and expenses caused by the company’s relocation to Spokane, company officials say.

Egghead lost $941,000, or 5 cents per share, on sales of $216.4 million during the quarter ended Dec. 30, 1995. That compares with net earnings of $3.8 million, or 22 cents per share, on sales of $254.3 million during the same quarter the previous year.

The company’s third-quarter earnings report, issued Thursday, notes that the earnings in the third quarter of fiscal 1995 reflect a non-recurring insurance recovery of $1.65 million.

Likewise, the company’s losses during the third quarter of this fiscal year include about $700,000 of non-recurring charges to complete the move of its operations to Spokane and “continue re-engineering the company.”

For the first nine months of fiscal 1996, the company lost $7.6 million, or 44 cents per share, on sales of $582.2 million. That compares with net income of $1.7 million, or 10 cents per share, on sales of $642.4 million for the first three quarters of fiscal 1995.

The nine-months losses for fiscal 1996 included expenses of $4.3 million attributed to the move to Spokane, according to the report.

During the third quarter, Egghead suffered declines in both its retail sales and its corporate, government and education sales.

Retail was off 8 percent, which the company attributes to a poor holiday season for retailers in general, and “significant disruptions as a result of relocating the company’s merchandising and advertising departments.”

Corporate, government and education sales decreased by 19 percent compared with the third quarter of the previous year. The company attributed the decline in sales to “the loss of a number of corporate customers as a result of the company’s relocation.”

In an interview last month, Terry Strom, Egghead’s chairman and chief executive officer, said the costs of Egghead’s move from the Puget Sound area to Spokane have now largely been absorbed and the company’s performance should begin to reflect the long-term cost savings the move represents.

He said the expense and disruption of the move were sacrifices the company had to make to achieve long-term competitiveness in the retail software industry.

During the third quarter, Egghead continued its strategy of closing some of its small, older retail outlets, and opening its larger, new format stores.

During the quarter, the number of Egghead’s retail outlets declined to 169 from 177 during the third quarter of fiscal 1995.

During the third quarter, however, Egghead opened 11 of its new format stores on both replacement and new sites for a total of 12 new stores in operation to date.

“We are extremely excited about the new stores,” Strom said in a news release accompanying Thursday’s financial report. “Our new format is easier to shop, better organized and far more comfortable than superstores.

“We’ve got a winning 21st-century retail formula,” he added. “We plan to keep executing and to roll out another eight new stores by April, and another 20 during the next fiscal year.”

Egghead is a leading retailer of computer software and accessories with retail outlets throughout North America.

, DataTimes