In the year to May 1 post-exceptional pre-tax losses were£899,000 after a£1.7 million write-down of old audio stock. The previous year the retailer made a profit of£2.1 million.
Managing director David Robinson said the market for audio separates has been shrinking as consumers move towards digital products, home cinema and plasma screens.
'In the last year we've rationalised our range and gone into a lot of different product categories,' he said.
He said Julian Richer stepped back into the business during 2003 to push through the changes. He had previously taken a back seat to become involved in other projects.
'He's overseeing the whole change and the developments with the buying teams,' said Robinson. He said Richer will spend the majority of his time with the chain for the foreseeable future.
Underlying profits of£1.6 million had also dipped as the chain responded to the changing market. Sales dipped slightly from£86.9 million to£85.4 million.
Three under-performing stores were closed during the year, including Sevenoaks, Swindon and Coventry. He said the chain will also relocate some smaller stores that are below the optimum size for selling large plasma screen TVs and home cinema.
Robinson said the old stock was cleared through massive, one day discounting events at stores.
The Richer Sounds chain is well known for its customer-led approach. Individual employees receive commission on sales and are fined or rewarded individually for customer reaction to service.