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CORRECTED - CORRECTED-UPDATE 2-School Specialty posts narrower-than-expected
February 18, 2010 / 2:35 PM / 8 years ago

CORRECTED - CORRECTED-UPDATE 2-School Specialty posts narrower-than-expected

(Corrects last paragraph to change the day to Thursday from Wednesday)

* Q3 loss $0.98/shr vs loss est $1.01/shr

* Q3 rev down 15 pct, in with street view

* Cuts upper end of FY10 profit view range by 6 cents

* Shares down as much as 5 pct (Adds details, analyst comment, updates share activity)

By Shobhana Chadha

BANGALORE, Feb 18 (Reuters) - School Specialty Inc SCHS.O posted a narrower-than-expected quarterly loss, helped by cost cuts, but lowered the upper end of its 2010 profit outlook range, sending its shares down as much as 5 percent.

It now sees earnings of $1.40 a share to $1.54 a share, compared with its prior range of $1.40 a share to $1.60 a share.

The school-products supplier also cut its revenue outlook to a range of $895 million to $910 million compared with its prior forecast of $915 million to $940 million.

“They did reduce their guidance but I think that is clearly an indication that the market conditions in school spending continue to be very challenging,” analyst Trace Urdan of Signal Hill Group said.

However the results are encouraging, it is evident that they are making terrific progress on the cost cutting side, Urdan added.

The company saw a 15 percent fall in revenue to $103.1 million and said the decrease was due to a difficult school spending environment, particularly in its furniture segment.

“The furniture segment is a derivative of new school construction and all new school construction has really stopped due to recession. You won’t see schools spending on furniture until they would see tax receipts improve at the state level,” analyst Urdan said.

The company said net loss for the third quarter ended Jan. 23, was $18.5 million, or 98 cents a share, compared with net loss of $23.4 million, or $1.25 a share, a year ago.

Analysts on average were expecting a loss of $1.01 per share, on revenue of $103.6 million, according to Thomson Reuters I/B/E/S.

Gross margins at the company, which distributes school supplies to pre-kindergarten through 12th grade, improved 550 basis points to 41 percent, the company said.

Selling, general and administrative expenses fell 11 percent to $65 million.

Shares of the Greenville, Wisconsin-based were down 42 cents in the morning trade to $21.83 Thursday on Nasdaq. They had earlier touched a low of $21.02. (Reporting by Shobhana Chadha in Bangalore; Editing by Aradhana Aravindan)

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