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Merisel Shares Off 40% on News of Lower Profit Margin

June 09, 1994|KAREN KAPLAN | TIMES STAFF WRITER

Shares in Merisel Inc. of El Segundo plunged 40% on Wednesday on news that the computer hardware and software distributor's second-quarter earnings will be lower than expected.

Merisel Chief Executive Michael Pickett announced Tuesday that lower profit margins and unexpectedly high merchandise returns would push earnings for the quarter down to between 9 and 12 cents per share. Analysts had predicted about 29 cents a share.

Wall Street's response was swift: Merisel shares lost $6.75 in Nasdaq trading, closing at $10. About 8.8 million shares changed hands--many times the norm for Merisel.

Chief Financial Officer James Brill said the company intentionally trimmed its margins by cutting prices to stimulate its wholesale business. He said Merisel wanted to assure investors that the company was not changing focus from wholesaling with its recent acquisition of 160 Computerland retail outlets.

For the Record
Los Angeles Times Friday June 10, 1994 Home Edition Business Part D Page 2 Column 3 Financial Desk 2 inches; 41 words Type of Material: Correction
Computerland outlets--An article Thursday on Merisel Inc., a computer hardware and software wholesaler, incorrectly described the relationship between the company and 160 Computerland retail outlets. A unit of Merisel is the franchiser for those stores, which are independently owned.

Charles Kulp, an analyst at Feeley & Wilcox in New York, said that, given the boom in computer sales, Merisel's long-term prospects appear healthy.

It has been a rough week for computer retailers. On Monday, shares in CompUSA fell to an all-time low on news that the company might report a fourth-quarter loss. CompUSA lost $2.375 to close at $9.50 on the New York Stock Exchange on Monday; it closed at $9.125 on Wednesday.

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