Navarre in red for fiscal Q2

Company cites retail consolidation, DVD sales softness for loss

By Susanne Ault -- Video Business, 11/7/2007

NOV. 7 | Citing retail consolidation and DVD sales softness, Navarre fell into red ink for its second quarter of fiscal 2008.

Navarre posted a $400,000 net loss for the three months ended Sept. 30. That compares to the $1.6 million net gain Navarre tallied for the same 2007 fiscal year period.

Revenue fell 9.6% to $158.9 million.

Navarre estimates it lost $5 million in the quarter over the prior year frame because of CompUSA’s closure of more than 100 outlets over the past several months. As a seller of computer software and DVD, CompUSA has been a key retail partner for Navarre.

Additionally, Navarre’s distribution business declined by $6 million because of the termination of what it said was an unprofitable contract between an unnamed major studio and retail partner. Overall, Navarre distribution operations fell 6.5% to $133.4 million.

Also, Navarre-owned DVD label BCI continues to struggle as it repositions from first-run product back into its previous core lines of budget and Latino titles. However, its proprietary anime label Funimation did meet sales and profit expectations, according to company executives.

Navarre’s publishing division, encompassing BCI and Funimation, fell 22.1% to $27 million in sales.

“Although the second quarter was difficult, we remain optimistic about the third and fourth quarters of this fiscal year,” said Cary Deacon, Navarre CEO. “Our preliminary October sales results are encouraging. We continue to work towards getting BCI on track.”

Deacon added the company performance also was likely affected by the upgrading of its operations technology system. Beginning in September, Navarre completed phase one of the new system implementation, impacting financial, sales, distribution and procurement activities. Phase two will concern transportation and warehousing.