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Stocks to watch Thursday
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December 29, 1999: 6:49 p.m. ET
CompUSA 2Q sales fall sharply; Day Runner, Merisel warn on earnings
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NEW YORK (CNNfn) - There was little holiday cheer in CompUSA Inc.’s second-quarter sales tally, reported after the markets closed Wednesday, while Day Runner Inc. and Merisel Inc. warned their upcoming quarterly reports would contain worse-than-expected losses.
CompUSA Inc.
CompUSA Inc. (CPU) posted a 21 percent decrease in overall sales during its fiscal second quarter as an ongoing restructuring hurt the company’s direct sales activity.
The Dallas-based retailer said overall sales for the quarter ended Dec. 25 were $1.38 billion, a sharp decline from the $1.75 billion profit it recorded a year earlier. Comparable store sales dropped a more modest 1.8 percent.
Sales were hurt most by a significant decline in direct sales, which fell 59 percent to $218 million. Technical service and training sales, which were also hurt by the restructuring, fell 23 percent to $30 million and $19 percent to $22 million respectively.
The lone bright spot for the company was a 24 percent jump in CompUSA’s Internet sales to $7.5 million.
The restructuring program is aimed at focusing the company’s sales toward more high-end products, a strategy company officials said is becoming more and more successful. For example, unit sales of notebook computers were up 35 percent during the quarter despite a roughly 5 percent price increase year-over-year.
Ultimately, the company expects the restructuring to result in a record gross margin level of 16 percent.
CompUSA will report its second-quarter earnings on Feb. 2. Before Wednesday’s announcement, analysts polled by research firm First Call Corp. expect the company to lose 4 cents per share.
Day Runner Inc.
Day Runner Inc.’s (DAYR) sales momentum ran out of gas during its fiscal second quarter, forcing the company to warn its earnings will be much worse than expected.
The Irvine, Calif.-based manufacturer of loose-leaf paper-based organizers said higher increased expenses and lower sales would result in a loss of 14 cents to 24 cents per share for the quarter ended Dec. 31.
That is far below both the 16 cents per share the company earned during the same period last year and the 21 cents per share profit analysts had expected.
James Freeman Jr., Day Runner’s chief executive, blamed the reduction in sales on "inventory tightening” by several large U.S. clients, a trend he believes the company "will be dealing with . . . for some time to come.”
For the quarter, Day Runner now projects it will post sales of $56 million to $58 million, compared with $64.6 million a year earlier,
Freeman said the company continues to explore strategic alternatives, as well as restructuring its operations to reduce costs.
Merisel Inc.
Merisel Inc. (MSEL) launched an internal restructuring that includes the elimination of 400 positions Wednesday, while warning its fourth-quarter loss would be much deeper than expected.
The restructuring, which will result in a $5 million to $10 million charge against the company’s fourth-quarter earnings, includes the recently announced combination of Merisel’s U.S. and Canadian distribution businesses. Company officials said once implemented, the changes would result in savings of $25 million annually.
In addition, the El Segundo, Calif.-based technology product distributor said it would lose between 15 cents and 20 cents per share during the fourth quarter before special charges. Analysts polled by First Call had expected a loss of 7 cents per share.
Company officials blamed the shortfall on significant revenue slowdown related to Y2k concerns. Sales for the quarter are now expected to tally $1.3 billion, a 7 percent increase above last year.
Northeast Utilities
Northeast Utilities’ (NU) acquisition of Yankee Energy System (YES) moved one step closer to reality Wednesday when the Connecticut Department of Public Utility Control approved the deal.
The Berlin, Conn.-based Northeast Utilities, Connecticut’s largest electric utility, agreed to acquire Yankee, the state’s largest natural-gas distribution company, in October for $478 million.
The deal still needs final approval from the U.S. Securities and Exchange Commission, expected early next year.
The merger is a reunion of sorts for the two companies. Yankee operated as a Northeast Utility subsidiary until 1989, when it was spun off.
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Thursday’s outlook
Shares of advertising firm Young and Rubicam (YNR) is expected to be active Thursday after Standard and Poor's named the advertising firm to replace General Instrument on the S&P 500 index on Jan. 5.
General Instruments (GIC) is being acquired by Motorola Inc. (MOT) on that date.
Economic news will be very light as the markets begin winding down the 20th century. The only report of note is the week's jobless claims survey, due out at 8:30 a.m. Economists are expecting claims to fall slightly to 280,000 for the week ended Dec. 25 after registering 281,000 last week. 
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