Tweeter Closing 19 Stores, Cutting Workforce By 6%
By Alan Wolf -- TWICE, 5/9/2005
Canton, Mass. — Tweeter Home Entertainment Group has begun shutting 19 underperforming stores in 10 states and will reduce its workforce by 6 percent, or approximately 220 employees.
More than half the layoffs are directly related to the closings, while the balance represents a general workforce reduction that also includes corporate personnel.
The closings mark the first time that Tweeter is shuttering locations other than through lease expirations.
According to interim CEO Joe McGuire, the 19 locations represent nearly 11 percent of the chain's 177 stores, but accounted for only 4.7 percent of total revenue, or about $38 million over the past 12 months. The stores lost $4.1 million over the previous six months and contributed 32 percent of Tweeter's operating loss year-over-year.
In addition, many of the stores “just do not fit” the company's new installation and services model, McGuire said.
Tweeter expects that about 15 percent of sales from the marked stores will transfer to other nearby locations, resulting in a net revenue reduction of about $32 million.
Liquidation sales began last month and will continue over the next four to six weeks, assisted by an outside liquidation house. The closings include three stores each in California, Florida, Georgia and Pennsylvania; two in Illinois; and one each in Alabama, Arizona, South Carolina, Tennessee and Texas. The targeted stores include former Bang & Olufsen, Hi-Fi Buys and Electronic Interior locations.
“Tweeter has been focused for the last 10 years on opening stores, not closing them,” McGuire said. “Going forward, you can expect a regular process of new store openings where we believe we can achieve growth in a market, and stores closing where units aren't contributing. By engaging in a process of closing under-performing stores, and adding new stores that contribute at a higher rate, we believe we will, over time, increase the performance of the whole fleet.”
Tweeter plans to open one new store in Bowie, Md., this quarter and one in Henderson, Nev., next quarter. In addition, the chain is currently relocating one store in northern Delaware, and will relocate a second store in the Chicago suburb of Oak Brook, Ill. The latter will be reopened using Tweeter's new prototype design, which debuted in the Las Vegas suburb of Summerlin, Nev., in January.
The company said it will likely incur costs related to the store closings of between $25 million and $30 million, most of which will occur during the current quarter. Of this, approximately $9.7 million is non-cash charges in the form of fixed asset write-offs, with the balance coming from estimated lease terminations, severance and other related closing costs.
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