Audiovox Sales Still Hurting From Weak Economy, CEO Says

"The U.S. economy still remains in flux and it’s hampered” Audiovox sales, “primarily at retail,” CEO Patrick Lavelle said on a Tuesday earnings call. The manufacturer’s CE and accessory business was “where we continue to feel weakness most,” he said. The company reported profit for Q3 ended Nov. 30 tumbled to $3.9 million, 17 cents a share, from $12.6 million, 55 cents.

"Holiday sales for December did not reach expectations, and industrywide CE sales in particular were down 5 percent,” said Lavelle. “The weakness in industry video sales also has a direct impact on our accessory products, particularly antennas, audio video cables and remote controls.” But the company’s mobile business “continues to increase” on an “uptick in car sales, and our international business continues to grow as well,” Lavelle said, expressing confidence that the U.S. economy “will rebound.” It is “just a matter of time and, when it does, we expect the company to deliver both top- and bottom-line growth,” he said.

Audiovox rear-seat entertainment systems, remote start and collision avoidance systems and “several of our multimedia products are in high demand, both in the aftermarket and at the” original equipment (OE) “level, which bodes well for our future business with expected increase in car sales projected for” 2011, said Lavelle. “Early indications are for as many as 14 million cars and trucks” to be sold this year, he said.

While overall Q3 Audiovox mobile product sales were strong, Lavelle said the company saw “slow sales at retail in several of our categories” in that sector. Also hurting it was its inability to make up for the $4.7 million in sales reported for Q3 2010 from FLO TV products, he said. Qualcomm decided in the fall to suspend direct-to-consumer sales of FLO TV devices (CED Oct 5 p8). Audiovox was “disappointed” with that decision, but didn’t expect much of an impact to Audiovox’s business from it, Lavelle said in his company’s Q2 earnings call (CED Oct 14 p3).

Audiovox’s mobile business, despite the challenges, was “much stronger today than at this time last year,” said Lavelle. Other “encouraging” signs for the company included its ability to add “several new retail accounts,” as well as an across-the-board Q3 margin improvement, he said. The company reported overall Q3 margins of 21.2 percent, up from 19.4 percent in the year-earlier quarter.

Overall Audiovox electronics sales grew 11.8 percent to $122.7 million, helped by stronger sales of mobile electronics products, especially in automotive security and from new OEM programs, as well as from its purchase last year of rear-seat entertainment manufacturer Invision, it said. Accessory sales, however, fell 11.9 percent to $40.5 million.

The company “chose not to participate in Black Friday promotions” in 2010 because it didn’t expect “a robust year” at retail, Lavelle said. “We still have concerns about the U.S. market, though we believe business conditions will improve as we move into our next fiscal year,” he said.

Audiovox “significantly expanded” its aftermarket OE-style Sound Solution line for 2011 with nine new models, Lavelle said. It’s now supplying radios for Toyota vehicles, Hyundai, GM and VW, and “we expect to add more models throughout the year,” he said. The company already fielded such systems for Toyota Camry and Corolla cars and added head units “compatible with VW, Honda, Hyundai, Toyota and GM,” Audiovox Electronics President Thomas Malone said during CES last week.

The company at CES also took the wraps off what it said was “the industry’s first automotive Blu-ray Disc player.” The AVDBR1 will ship this spring at $349.99, Audiovox said. It gets installed under a car seat or in a storage compartment in the vehicle and connects to any monitor by using HDMI, composite or component output, the company said. It developed the product “in response to the consumer preference for Blu-ray Discs in their home entertainment systems,” said Malone. The “mobile solution will allow them to maintain a single video collection that works both in the vehicle and at home,” he said. “There are more than 1,600 Blu-ray titles and over 190 BD-Live content titles available” now in the U.S., and “Blu-ray content will continue to grow every year,” he predicted.

Twelve-volt manufacturers had been hesitant to introduce Blu-ray players for the car, in part because they didn’t think there was enough demand for the format in vehicles, we were told at CES last year. Keith Lehmann, senior vice president of Kenwood U.S.A., told Consumer Electronics Daily Tuesday that “a Blu-ray product is on our technology roadmap, meaning that we are studying the feasibility of an in-car device with a Blu-ray transport. Whether we actually build one is dependent upon the overall penetration of Blu-ray DVDs as well as the development and popularity of streaming content over broadband networks."

Audiovox said last week that it signed a non-binding term sheet to buy all shares of Klipsch Group and that manufacturer’s global subsidiaries. The purchase was “subject to a number of contingencies, including satisfactory completion of due diligence, negotiation and signing of definitive agreements and requisite approvals,” Audiovox said. The company said it planned to finance the acquisition with a combination of cash and a committed credit facility. Other terms weren’t disclosed and Lavelle didn’t provide any new details on Tuesday. Audiovox has “been actively pursuing acquisition opportunities that will grow the company and improve our financial performance,” he said: The Klipsch brand is “world-renowned and we believe Audiovox shareholders will benefit from the value of their unique market position, diversified customer base in home and professional channels, and their ongoing commitment to innovation.”