Media Arts Group Reports 53% Net Sales Growth and 50% Increase in Net Income for 1999 Fiscal Year

Business Wire, May 5, 1999

SAN JOSE, Calif.--(BUSINESS WIRE)--May 5, 1999--

Media Arts Group, Inc. (NYSE:MDA), today reported net sales for the fiscal year ended March 31, 1999 of $126.3 million, a 53% increase from $82.7 million in the prior fiscal year.

Net income increased 50% for the year to $18.4 million, or $1.34 per diluted share, compared with net income before extraordinary items of $12.3 million, or $1.04 per diluted share, on 16% fewer shares in fiscal 1998.

For the fourth quarter, net sales were $31.4 million, up 23% from $25.4 million in the corresponding period one year ago. Net income for the quarter was $4.3 million, or $0.32 per diluted share, compared with net income before extraordinary items of $3.9 million, or $.30 per diluted share, on 6% fewer shares in the fiscal 1998 fourth quarter.

"Media Arts had an excellent year, with sales growth driven by expansion of our branded distribution, same-store sales growth and increased licensing revenue, all of which reflects the continued appeal and diversity of the Thomas Kinkade lifestyle brand," said Bud Peterson, President and CEO of Media Arts Group. "During fiscal 1999 we opened 112 new Signature Galleries and Company-owned retail stores, which met our goal for expansion of our dedicated retail distribution channel. We also made substantial strides to continue to broaden and leverage our lifestyle brand into new channels of distribution and new branded products through such ventures as our licensing agreements with La-Z-Boy and U.S. Home. Additionally, in April 1999 Warner Books published Thomas Kinkade's Lightposts for Living, a hugely popular new book that already has landed on a number of prominent best seller lists. These efforts have played a significant role in raising consumer awareness of and demand for the Thomas Kinkade lifestyle brand."

Peterson continued, "We are pleased that our fourth quarter results met expectations, particularly in light of some timing issues and difficult year-over-year comparisons to an exceptionally strong fourth quarter in fiscal 1998. In that period, we released three images, including the hugely popular 'Garden of Prayer,' which was in stores for the entire quarter. Same-store sales growth in the fiscal 1998 fourth quarter was an impressive 29%. In the fourth quarter of fiscal 1999, we released only two new images, one of which -- the eagerly awaited new Carmel image, 'Sunset on Ocean Avenue' -- did not appear in stores until early March, while the other image, 'Lakeside Hideaway,' was not shipped until the end of March. Despite fewer new images and significantly fewer selling days, same store sales were equivalent to last year's strong fourth quarter. Additionally, the late March release of 'Lakeside Hideaway' resulted in a slight increase in product costs in the fourth quarter of fiscal 1999 due to the compressed shipping period."

For the fiscal year ended March 31, 1999, net sales to wholesale customers, including independently-owned Thomas Kinkade Signature Galleries(TM), increased 59% to $99.1 million compared to the prior fiscal year. Sales to Signature Galleries increased 105% to $40.4 million from $19.7 million in fiscal year 1998. For the fourth quarter, net sales to wholesale customers increased 21% to $25.2 million compared with $20.9 million in the 1998 fourth fiscal quarter. Sales to Signature Galleries grew 46% to $10.9 million in the fourth quarter from $7.5 million one year ago, primarily as a result of an increase in the number of Signature Galleries to 169 from 74 at March 31, 1998, as well as increased promotional activities and programs in the quarter. Sales to Showcase dealers, a branded distribution channel selling Thomas Kinkade products in a shop-in-shop retail format, increased 66% in the fiscal year and 11% in the quarter.

Retail sales at the Company-owned Thomas Kinkade Stores increased 33% to $27.4 million in fiscal 1999 from $20.6 million in fiscal 1998, driven by the opening of 13 new Thomas Kinkade Stores during fiscal 1999 and by increased sales and marketing efforts. Combined comparable store sales for the Company-owned Thomas Kinkade Stores and the Signature Galleries increased 7.7% in fiscal 1999. Retail sales at Thomas Kinkade Stores increased 36% to $6.2 million in the March 1999 quarter from $4.6 million in the corresponding period one year ago. Combined same store sales in the fourth quarter were equivalent to the year ago period.

Sales to other, non-dedicated wholesale accounts, excluding the Signature Gallery and Showcase dealer branded distribution channels, increased 6% in the year to $25.4 million from $24.1 million. In the fourth quarter, sales to other non-dedicated wholesale accounts were $5.3 million compared to $6.9 million one year ago. This decline was as expected and reflects the Company's strategy of focusing on the growth of its branded distribution channel, which has resulted in the upgrade of certain wholesale accounts to higher dealer levels, as well as the strategic closure of other non-dedicated wholesale accounts.