Harvey Electronics Inc. (fka HRVEQ)

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Harvey Electronics, Inc. Reports Sales Results for the Six Months and Second Quarter of Fiscal 2006; Second Quarter Gross Profit Margin Expected to be Strong
Harvey Electronics, Inc. ("Harvey Electronics", "Harvey" or the "Company"; NASDAQ: HRVE) announced sales results for the first six months and second quarter of fiscal 2006, ended April 29, 2006.

For the six months ended April 29, 2006, net sales aggregated $20.9 million, a decrease of $882,000 or 4% from the same period last year. Comparable store sales for the six-month period ended April 29, 2006 decreased approximately $2.3 million or 10.5% from the same period last year.

For the second quarter of fiscal 2006, net sales aggregated $9.5 million, a decrease of $182,000 or 1.9% from the same quarter last. Comparable store sales for the second quarter of fiscal 2006 decreased approximately $976,000 or 10% from the same quarter last year.

Mr. Franklin Karp, CEO and President of Harvey Electronics stated, "While their can be no denying that sales remain softer than we had hoped, our results are being impacted by the shortages in flat-panel video product. When these products were available in February, and we were able to fill orders, we had a very strong month. However, in April, we experienced slow retail traffic, exacerbated by the continued shortages of flat-panel product. April's sales results were very disappointing and had a negative impact on our second quarter."

"Our overall custom installation business continued to be strong in the second quarter of fiscal 2006, increasing by approximately 5%, and our labor sales continued to grow, increasing by approximately 22%. These higher margin sales had a positive impact on gross profit margins for the quarter. We expect to see improved gross profit margins for the second quarter of fiscal 2006 as compared to the same quarter last year."

Mr. Karp continued, "Our custom installation business continues to increase, representing over 67% of second quarter sales, however, our retail traffic has declined. In response, we are modifying our advertising campaign to reflect current market conditions, customer needs and service demands. We recently conducted consumer focus groups and are now analyzing the findings and results of these groups. We believe the delay in releasing our new advertising campaign, impacted sales. We are excited about the new marketing efforts and are hopeful that the new campaign, when released during the third quarter, will improve sales and operating results."

"Our second quarter was impacted by a decline in audio and video sales, partially offset by an increase in labor revenue. While flat-panel product shortages and video price compression have continued through the first six months of fiscal 2006, demand for flat-panel televisions has increased and unit sales have surged 28%. The increase in unit sales was experienced from the sale of larger size plasma and LCD televisions. This continues to provide a service opportunity for Harvey, as customers require custom installations of these televisions and related home theaters. Our overall flat-panel sales in dollars and units have increased for the first six months of fiscal 2006. However, our overall video business declined approximately 1.6% for the first six months of the year, reflecting declines in more traditional video products. We do expect to see additional flat-panel product availability from our key vendors in the summer and fall of 2006."

"May's sales results to date have continued to be slow and key flat panel product shortages have continued."

Mr. Karp stated, "Our new Bridgewater, New Jersey store, opened in fiscal 2005, is maturing nicely and has exceeded our sales projections. We expect Bridgewater to contribute net store profitability for fiscal 2006."

"Management has been proactive in response to the sales decline, reducing selling, general and administrative expenses, including payroll and certain store occupancy costs, improving purchasing and inventory efficiencies, implementing appropriate merchandising changes, while cultivating our profitable service business. We have also modified our labor rates improving revenues and resulting margins. These efficiencies should benefit results for the remainder of the fiscal year."

Mr. Karp concluded, "We are very optimistic about the upcoming annual shareholders' meeting. We believe the infusion of the proposed $4.0 million equity growth capital combined with the talents and proven track records of our new proposed Board members will help to achieve Harvey's goal of becoming the dominant custom installer of home theaters in the New York Metropolitan region."

Harvey Electronics is a leading retailer and custom installer of high quality, exclusive home theater, audio and video products in the metropolitan New York area. The Company currently operates a total of nine locations; eight Harvey showrooms and one separate Bang & Olufsen branded store. There are two Harvey locations in Manhattan and six suburban locations in Paramus, New Jersey; Mt. Kisco, in Westchester; Greenwich, Connecticut; Greenvale/Roslyn, on the north shore of Long Island, in Eatontown, New Jersey and our newest store in Bridgewater, New Jersey. The Bang & Olufsen branded store is located in Union Square on 927 Broadway at 21st Street, in Manhattan. The Company also has a Bang & Olufsen showroom within our Harvey retail store in Greenwich, Connecticut.

Audio Video International, a well-respected trade publication, has named Harvey Electronics a national "Top Ten Retailer of the Year", seven years in a row.

Please visit a Harvey store or one of our Bang & Olufsen showrooms. Also, please inquire about Harvey's custom installation services.

From time to time, information provided by the Company, statements made by its employees or information, included in its filings with the Securities and Exchange Commission may contain statements, which are so-called "forward-looking statements" and not historical facts. Forward-looking statements can be identified by the use of words such as "believe", "expect", "intend", "anticipate", "in my opinion", and similar words or variations. These forward-looking statements are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The Company's actual future results may differ significantly from those stated in any forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including, but not limited to, product demand, pricing, market acceptance, litigation, risks in product and technology development and other risk factors detailed in the Company's Prospectus dated March 31, 1998 and from time to time in the Company's Securities and Exchange Commission reports including its Form 10-K and Forms 10-Q.

For more information and showroom locations, visit our website at www.harveyonline.com.


For Harvey Electronics, Inc.
Michael E. Recca, 212-709-1907
Fax: [phone]
[e-mail]
or
Harvey Electronics, Inc.
Franklin C. Karp, 201-842-0078
[e-mail]
or
Joseph J. Calabrese, 201-842-0078
[e-mail]
Fax: [phone]



Source: Business Wire (May 19, 2006 - 3:30 PM EDT)

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