Vox International the owner of Klipsch and the Premium Audio Company is wallowing, revenues and profits are down, expenses are up, and the Company is suffering because retailers are cutting back on the Companies audio products.

Management claim that sales of audio products are set to fall with Australian retailers moving to range products from archrival Sound United who took over Vox International’s former distributor Qualifi.

The US business whose executives have been accused of operating in an unethical manner in Australia, after they moved to conspire with staff at Qualifi who at the time was their officially appointed distributor to extract confidential sales information ahead of the business setting up their own subsidiary operation.

Even today, Phil Hawkins, the Sales Operations Director at the Asia Pacific operations of Premium Audio Company a Vox International owned Company, has not explained why he copied confidential information belonging to Qualifi weeks out from him leaving the Company.

He has also not explained how a USB back up drive containing 18 months of confidential sales information was found in the bottom draw of a desk he had vacated suddenly when asked to leave the premises of Qualifi.

In their latest filing the business reported that Q2 net sales were $125.7M down 12.2% year on year.

Consumer Electronics sales in the second quarter were US$88.0 million compared to $97.0 million in the comparable year-ago period, this was a decrease of $8.9 million or 9.2%.

Also falling was Premium Audio product sales they came in at $69.2 million compared to $76.1 million in the prior period.

The decline in Premium Audio product sales was primarily related to lower domestic sales of premium home theater speakers and wireless speaker products.

In a briefing to analysts the Company admitted that nonessential leisure products were now “feeling the pinch”.

They admitted that major retailers have recently lowered their levels of Vox International inventory such as Klipsch speakers because of lower sell-through and the fact that they know the supply chain is full and they can avail themselves of product quickly without carrying the capital cost of carrying stock.

Premium Audio, sales of premium home speakers and wireless speakers were down $24.5 million, but this was offset by an increase of $18.4 million in sales of Onkyo and Pioneer products.

Sales at the Asia Pacific operations of Premium Audio were up $3.7 million this was because the business had a “terrible” year last year. Also contributing to the growth is sales of Onkyo and Pioneer products that the local subsidiary did not range last year.

Management have admitted that expenses were up 3%.

It has also been revealed that total debt at Vox International increased to $37.7 million from $13.2 million with manufacturers of their Onkyo and Pioneer products demanding cash up front.

The Company said that $27.4 million of their domestic credit facility as working capital purposes to secure inventory moving into fiscal 2023 third quarter.

The Company said that selling expenses were flat with higher website and advertising expenses, offset by lower commission and salesman salaries.

General and administrative expenses increased by $1.2 million.

Pat Lavelle — President and Chief Executive Officer told analysts “We do business with some of the biggest retailers in the world. And coming out of their first quarter, if you recall, they all missed their numbers, and their reaction was to severely cut back on inventories. I mean, in many cases, we see their sell-through, they were selling through merchandise but not reordering. Their mantra was to bring down the overhead of inventory that they are carrying and that they’ve worked on for the better part of this year”.

Addressing the issue of the impact of the strong US dollar Lavelle claimed that the strong US dollar is starting to impact as Europe and Countries like Australia faced price rises due to the strong dollar.

“Where our goods are more expensive because the dollar-denominated, we have hedged — we traditionally on our inventory buys have hedged, so that we can maintain somewhat of a stable pricing structure. On the contrary, what we’re talking to our manufacturers about is because of the strength of the dollar and they do pay them in dollars, and we’re looking for additional discounts based on that.

Where we have been impacted negatively is on the yen-based loan that we have at OTKK, which is the Japanese Onkyo operation. And to date, we’ve taken about a $3 billion — kind of somewhere around $3.4 million, $3.5 million currency charge, marking that loan to market, which is not going to be paid for — it’s not due for 10 years. So that’s the one area that we’ve gotten hit. It’s not an operational expense, but it does hit the pre-tax line.”