Tweeter Home Entertainment ( TWTR) reported a wider second-quarter loss Tuesday due in part to lower gross margin, particularly in its television segment. The company also forecast a third-quarter loss below analysts' projections.

In the quarter ended March 31, the consumer electronics company lost $4.6 million, or 19 cents a share, including a pretax, noncash compensation charge, compared with a net loss of $2.5 million, or 10 cents a share, in the year-earlier period. Excluding the charge, the company lost 6 cents a share, which matched the Wall Street consensus.

"Although our bottom-line performance for the second quarter does not speak to our progress, we feel that we are making substantial improvements in many facets of the business," Tweeter said in a statement. The company has struggled with fierce competition from rivals Best Buy ( BBY) and Circuit City ( CC).

Canton, Mass.-based Tweeter said revenue increased 4% to $189 million, with same-store sales up 3% in the quarter.

The company had an operating loss of $2.2 million in the quarter, excluding the $5 million noncash compensation charge. That compared with an operating loss of $3.3 million a year ago.

Tweeter also had a 70-basis-point decrease in gross margin during the quarter, a 170-basis-point decrease in selling expenses and a 30-basis-point increase in corporate expenses. The decline in gross margin is due to both an increase in the mix and a decrease in the margin rate of television products, the company said.

"We are also pleased with the progress being made on our supply chain, inventory management and cash conversion cycle initiatives. We reduced our cash conversion cycle days by seven year over year, with the largest contributor being a reduction in days of inventory from 108 a year ago to 98 at the end of March," the company said. Net inventory at quarter end was $124 million, compared with an ending level of $144 million a year earlier.

Looking to the third quarter, Tweeter expects sales of $171 million to $178 million, with a loss of 12 cents to 16 cents a share. Tweeter also expects same-stores sales to be up 4%.

Analysts were calling for a loss of 10 cents a share in the third quarter.

Separately, the company said it will acquire a small audio installation company in North Carolina called NOW! The transaction is expected to be completed around July 1, and will bring Tweeter's store count to nine in North Carolina and four in Tennessee.

In the rest of fiscal 2004, Tweeter expects the acquisition to have a neutral affect on earnings, while in 2005 it is expected to contribute to earnings. NOW! has about $21 million in annual sales.

Tweeter has 175 total stores under the Tweeter, HiFi Buys, Sound Advice, Bang & Olufsen, Electronic Interiors, Showcase Home Entertainment and Hillcrest High Fidelity names in New England, Texas, Southern California, the mid-Atlantic, Chicago, the Southeast, Florida and Phoenix.

Shares of Tweeter closed at $8.47 Monday on the Nasdaq.