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Uncertain Economy Signals Coast 1Q Net Loss

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May 15, 2012 by   Leave a Comment

Aftermarket supplier Coast Distribution System Inc. reported a net loss on lower sales for its first quarter ended March 31.

Net sales for the quarter fell 1.8% to $24.2 million compared to net sales of $24.7 million in the first quarter of 2011. According to the company, the decrease was primarily the result of continuing consumer uncertainties about the strength of the overall economy, persistently high unemployment rates and the adverse effect of recent increases in gasoline prices on consumer discretionary spending.

The Morgan Hill, Calif.-based company reported a net loss of $1.3 million, or $0.30 per diluted share, for the first quarter of 2012, compared to a net loss of $1.0 million, or $0.23 per diluted share, in the same quarter of 2011.

Gross profits declined by $489,000, to $3.4 million, resulting in a decrease in gross margin to 14.1% in the 2012 first quarter from 15.8% in the same quarter of 2011. That decrease was the result of selected price reductions that Coast implemented in response to aggressive price competition in the market, as well as an increase in shipping costs related to fuel prices.

“The first quarter was challenging in terms of both revenues and margins as we faced an increasingly competitive market environment,” said Coast CEO Jim Musbach. “Our sales were impacted by soft consumer demand as well as increased promotional pricing on a variety of products, and the more competitive pricing translated into compressed gross margins. These factors are also affecting the broader RV industry as manufacturers and dealers have faced increased discounting in the market, although recent projections from RVIA suggest growth in RV unit shipments may improve over the course of 2012.

Until we see a pick up in sales and usage of RVs that will drive increased demand for our products, we will continue to balance defending our market share with continued tight management of operating expenses.”

To read the entire report click here.

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