Surge Components Inc. reported a significant decline in financial performance for the fiscal year ending November 30, 2024, with net sales decreasing by 14% to $31.2 million, down from $36.3 million in the previous fiscal year. The company attributed this decline to reduced business with both new and existing customers, as many clients are currently managing excess inventory accumulated during 2022. This situation has led to customers delaying new orders and product launches, impacting Surge's revenue generation.
Despite the drop in sales, Surge's gross profit for the fiscal year was $8.9 million, a decrease of approximately $1 million from the previous year. However, the gross margin improved to 28.5%, up from 27.4% in 2023, primarily due to increased sales to customers with higher profit margins. The company faced ongoing pressure from customers demanding price reductions, which could further impact profit margins in the future. Selling and shipping expenses also decreased by 9% to $2.7 million, reflecting the overall decline in sales activity.
Operationally, Surge Components employed 42 individuals as of November 30, 2024, maintaining a stable workforce compared to the previous year. The company continues to rely heavily on its primary supplier, Lelon Electronics, which accounted for 28% of its consolidated purchases in both fiscal years. Surge's inventory strategy involves maintaining a large stock to meet customer demands, which exposes the company to risks associated with price fluctuations and technological changes in the market.
Looking ahead, Surge anticipates continued challenges in 2025, including inflationary pressures and supply chain disruptions. The company is cautiously optimistic about its ability to navigate these challenges, particularly as customers begin to consume their excess inventory and resume ordering. Surge is also exploring growth opportunities and evaluating its cash resources to support future expansion. However, the ongoing geopolitical tensions and potential regulatory changes in China could pose additional risks to its operations.
About SURGE COMPONENTS INC
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