Ultrak Inc. has been notified by the wholesale retailer Sam’s Club that it will discontinue Ultrak’s Exxis security products currently sold in its stores, after Ultrak’s commitments to its suppliers relating thereto are satisfied (estimated to be in October).
Sam’s Club will replace the three existing Exxis stock keeping units (SKUs) with products from another supplier. Meanwhile, Sam’s Club has expressed interest in having Ultrak supply the store other Exxis products not currently offered.
Ultrak is now in discussions with other retail accounts to replace some or all of Sam’s Club revenue. The company estimates that, on an annual basis, it now derives about $20 million in revenue and $3 million of pretax income from its sales to Sam’s Club. If the sales to Sam’s Club are not replaced by sales to other retailers, the revenue loss would have an effect on Ultrak’s financial results beginning in the fourth quarter of this year.
In order to protect Sam’s Club business, Ultrak has in the past not sold Exxis products to anyone else. Company officials believe that its ongoing cost-reduction and margin-improvement programs in all of its business units should help offset the profit impact of any net reduction in revenues.
