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Excerpts From Seaman's 1996 Annual Report

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The following information was contained in Seaman's most current (1996) annual report in a message from Alan Rosenberg, President & CEO of New York Based Seaman's Furniture. The snowiest winter in recent years and the reluctance of consumers to make high ticket furniture purchases made fiscal 1996 a challenging year for Seaman Furniture. While the Company's performance did not match the strong results of fiscal 1995, overall sales volume increased 6% from $216 million to $230 million. At the same time, we were engaged in the most aggressive expansion in Seaman's history, which included our first venture beyond our traditional marketing area to northeast Ohio. In all, the Company added nine new stores, increasing the total to thirty eight, including four in Cleveland and one in Akron. The openings of these Ohio stores were somewhat delayed, resulting in a higher-than-expected impact on profits from the expenses associated with the expansion. The adverse retail environment, plus record snowfalls and intense cold that discouraged shoppers from venturing out, also prompted the Company to offer more promotions, which impacted gross margin. The result of all these factors was a decline in net earnings from $8.6 million in fiscal 1995 to $3.9 million in fiscal 1996. Same store sales declined 5%. Despite these results, we are confident in the soundness of our strategies and prospects for the future. Some of these strategies are as follows: Our tried and true marketing concepts - lean and deep merchandising, "The PackageĀ®" technique of grouping and coordinating pieces of furniture at significant savings, and saturation advertising - continue to differentiate us from our competitors and attract customers. In addition to our main merchandising themes, the Company is focusing on more innovative and diverse merchandise selections, and is particularly conscious of the need to adapt both to regional tastes and the tastes of a constantly changing population. The reaction to our entry into the Cleveland market has been very positive. Seaman's was a star attraction at both the Cleveland Winter Bridal Show and the Home & Garden Show, and sales volume is building. Most of our showrooms have now been converted to the new home-like format, with a bright display of attractive rooms that allows consumers to envision the furniture in their own homes. A wireless, radio-frequency bar code system, already installed in our Islip warehouse, and ready for introduction at the Woodbridge warehouse, will give the Company better control over inventory, positively effecting both the bottom line and service to our customers. A new sales training program, developed internally, will improve the ability of our sales associates to explain the features and benefits of our furniture and to provide more accommodating service. In addition to our expansion to Ohio, this past year saw Seaman's return to Fulton Street in downtown Brooklyn, NY where the Company was founded 63 years ago, and open stores in Norwalk, CT, King of Prussia, PA and Cheltenham, PA. Store additions will continue during the next year, however at a less aggressive pace, so we can assimilate last year's additions into the chain. Looking ahead, the Company anticipates opening additional stores in existing market areas to further leverage the expense base of our advertising and distribution. However, we will continue to seek and capitalize on unique real estate opportunities in markets which support our target customers who represent a broad based segment of our country's population. In its over 60 year history, Seaman's and its management team, who have collectively over 200 years of retail experience, have seen and experienced many business cycles. We know how to manage those times when the weather is so bad our trucks can't deliver, and sales lag. The Company will continue to stay focused and monitor and control expenses with a keen awareness of both present conditions and future opportunities. We appreciate the support of our loyal employees and stockholders, and pledge our efforts to make 1997 a better year. The "Seaman's" concept has staying power. With cautious optimism the largest regional specialty retailer in the Northeast sees a bright futures. -STORE EXPANSION The highlight of fiscal 1996 was Seaman's dramatic expansion. Not only did the number of stores increase from twenty nine to thirty eight- nearly a one-third increase, the biggest in our history - but Seaman's also moved, for the first time, beyond the traditional Northeast market area. The past year also saw Seaman's return to the heart of Brooklyn, the neighborhood of our roots, with a new store on Fulton Street. Seaman's further leveraged its advertising and distribution network in the Philadelphia area by opening in King of Prussia and Cheltenham, Pennsylvania, both suburbs of Philadelphia. A new store was also added in Norwalk, Connecticut. But it was in Ohio that Seaman's made a grand entrance, opening five stores, four in Cleveland and one in Akron. Without any acquisition costs, Seaman's leased the stores from a furniture retailer that was leaving the Ohio market. As a result, Seaman's was able to acquire five stores at one time. In addition, the Company hired many of the former retailer's employees, experienced people who have subsequently expressed their pleasure at being part of the Seaman's team. One store manager, with midwest aplomb, sent some Cleveland Indians' baseball caps to the corporate office on Long Island with the suggestion that we wear them to N. Y. games to show we were all part of the same "team". Seaman's was also invited to decorate and furnish two of four complete homes that were part of the Cleveland Home & Garden Show, which covered an amazing indoor space of 20 acres. The Company's Visual Store Coordinator, Dion Genovese, using Seaman's merchandise and layouts, decorated a log cabin and a ranch home. These homes were not just facades, but complete dwellings. Dion's job was to decorate these homes with everything from window treatments and accessories to furnishings for every room. Over 350,000 people visited the show, and the local television station provided daily coverage. "Better Homes and Gardens" took pictures. A video of the show will soon be released. Topping off the ten days was the recognition Seaman's received for "Best of Show, Interior Design." In the next year, the Company does not expect to expand into new markets, and will concentrate on assimilating its recent growth. New stores may be opened, but they will be in existing market areas to further leverage our advertising and distribution base. However, we will always seek to profitably capitalize on attractive real estate opportunities in the many areas which match the target profile of our customers. -TECHNOLOGICAL SOPHISTICATION After installing a new state of the art computer system in fiscal 1995, we turned our attention to inventory control. An essential part of the Company's marketing strategy is to provide quick delivery of furniture, a service that contrasts sharply with the months of waiting that some of our competitors typically ask their customers to endure. In the past, generally, our sales associates have been able to promise delivery within 15 days, but they have never been able to give a definitive schedule. We can now, with assurance, pinpoint a customer's delivery thanks to the technological sophistication of a wireless, radio-frequency bar code system that was installed in our Islip warehouse in April of this year, and which will also be functional in our Woodbridge warehouse before the end of this Summer. The new system will allow our sales associates to determine whether a particular piece of furniture is in stock, where it is located, and when it can be delivered. The benefits of the new system are more comprehensive than just the enhancement of one of Seaman's competitive advantages. The benefits are also financial in nature. They should positively impact the bottom line, because the Company will have better control of inventory flow and shrinkage, and more efficient warehouse operations. The Company will also avoid the expense of the preparation for counting the inventory at the end of each fiscal year. Instead, the Company will have instantaneous and continuous access to accurate records of inventory counts and locations. At Islip, the benefits were immediately apparent, with many inventory discrepancies being promptly resolved when the system became operational. Bar codes are not new to Seaman's. However, the codes previously gave only limited information, such as, that an item was a green sofa. Moreover, the codes were used only for the physical counting done annually. With the new system, as each piece is received from the manufacturer into the warehouse, it is assigned a unique radio-frequency identification number. Software programs convert that number into information that, among other things, includes when the piece was received, exactly what it looks like, and where it is stored. All of this information is then transmitted automatically to corporate headquarters. Each day, warehouse supervisors electronically access the list of items to be delivered. The system then creates individual instructions for each warehouse person, on what items are to be picked and on the most efficient order for picking, based on the item's location in the warehouse. The picking machines are also equipped with their own wireless bar code reader and printer. As an item is picked, the operator scans the bar code and generates a label that tells exactly where the item is to be delivered, and for which customer it is intended. The pieces are scanned again as they are put into cages for each delivery truck, so that if the customer has canceled the purchase or asked for a delayed delivery, the expense of an unnecessary trip will be avoided. With one of the highest rates of inventory turn in the industry - approximately five times a year - the Company expects significant improvement in operations thanks to this latest enhancement of our management information systems.

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