News and Reviews....
Tweeter's Big Adventure May 2007
We have been following a very interesting story and it relates to all BIG BOX Stores as well as our business. High-End consumer electronics retailer Tweeter Home Entertainment has announced last week, it did not have sufficient working capital to fund its shot-term financial needs, and without securing additional funds might file for bankruptcy protection. How did this happen ? Tweeter was the #1, highest grossing retailer in 2006. The Tweeter problem reflects on this years declining margins on projection and plasma/LCD televisions in addition to the competitive nature of the Custom Electronics Retail landscape. Tweeter plans to shutter 49 of its 153 stores and restructure operations. All California store locations are to be closed by June. It strikes me funny, because California is one of the hottest markets for custom home electronics in the country. Tweeters is also closing nine HiFi Buys in Georgia, four Showcase Entertainment Centers in Arizona and 24 Sound Advice locations in Florida, second hottest location in the nation for custom home electronics. Tweeter has reported $1.9 million in available cash, with current liabilities exceeding $95 million, and $12 Million available from a revolving $75 Million credit facility. Doesn't sound good.
In the same vein, Circuit City loss of roughly $116 Million in same store sales 4th Quarter, where last year they were $144 Million UP. All of the loss blamed on shrinkage in projection and Plasma / LCD panels. It seems that during the months of mid-September to mid-December the market in Projection TV, Plasma and LCDs was slashed by the top vertical glass to product makers. Although there are numerous product names in the industry, keep in mind that all glass is manufactured by five companies. Those companies control the vertical cost of the product and so can produce it faster and more economical then the lot. It puts all TV makers, outside the five glass makers in a vulnerable position. Toshiba, just this week announced it is OUT of the plasma market but still in the LCD market with its new REGZA, LCD Panels. An indication that the internal market is overly controlled. And so, if you are planning to purchase a plasma or LCD panel from a BIG BOX STORE, beware that you may be purchasing glass that is 2-5 generations back from present and not ever know. You might be getting a fantastic price at a great technical loss.
Comment ..... We have always looked at Tweeter Home Entertainment, out of all the Big Box Stores, as a competitor in the home electronics integration business, although we have bailed out projects where their customers were frustrated with non-performing set-ups, incomplete systems, hacking of their existing system to a form that was less then when started and other problems. The reason we kept eye on them more then the rest is not because of their level of service or expertise, but the brands of glue materials they were retailing. They had the right mix. It proves the fact that the materials don't make the system, the background of the designer, and competency of the installer assures the system integrity. Having project problems was a direct reflection on their workers and subsequent manager under-sight to get the job done correctly and follow through to the customer. Losses of the magnitude we have mentioned, was another under-sight of their management by not demanding price protection from its vendors. Rest assured that Custom Audio-Video Systems is a bit faster on its feet and offers the latest in model and features from the moment we begin a design for a client. Our backgrounds speak for themselves.
Update .....
We have learned that on or about June 15, 2007, Tweeter Home Entertainment has filed for financial reorganization under Chapter 11 of the U.S. Bankruptcy Code. For the second quarter (ended March 31) Tweeter posted losses of $35.2 million, compared to income of $424,000 and restated revenue of $186.8 million during the same period last year. Immediately. we started receiving calls from folks that told us of their great savings on merchandise at Tweeter's. The only thing the store could not sell through was the know-how and expertise of connectivity and smooth operational controls which is where we come in. We had to remind our new client of our MSBO policy which plays in to the installation of products not acquired from our stock room. In most cases the money saved was not a major issue when compared to new products and technology offered by our sales people in comparison.
If you liked this article, please let us know by filling in a comment on our email page.
