Gerard Klauer Trims Tweeter Outlook

Analyst Scot Ciccarelli says the electronics retailer's first quarter earnings warning could lead to heavier inventory later in the year

Gerard Klauer Mattison cut its estimates on Tweeter Home Entertainment (TWTR ).

The home electronics retailer sees first quarter same store sales down 12%-15%, vs. previous expectations for flat to a 1% increase.

Analyst Scot Ciccarelli cut his 58-cent first quarter earnings per share estimate to 23 cents, and slashed the 75-cent fiscal 2003 (Sept.) estimate to 30 cents, but says his confidence in these figures is very low. While Ciccarelli says his estimates are still preliminary, he cut the 95-cent fiscal 2004 earnings per share estimate to 60 cents.

Ciccarelli says the poor December sell-through will likely translate to a heavier-than-expected inventory position heading into the second quarter, creating an additional markdown risk, but he says this is not fully factored into his new estimates.

He thinks Tweeter's sales and earnings per share shortfall could put the company in technical default on some of its debt covenants, which may raise borrowing costs.

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