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CompUSA Shutting Good Guys

10/04/2005 01:32:00 PM Eastern

Dallas — CompUSA is pulling the plug on Good Guys almost two years after acquiring the struggling West Coast A/V chain and will use the brand to expand its two-year-old strategy of offering premium home entertainment products within its eponymous PC stores.

The move represents the final chapter in Good Guys’ nearly decade-long decline following rapid over-expansion and increased retail competition.

CompUSA closed six freestanding stores and five hybrid CompUSA/Good Guys megastores last week, and will shut the remaining 35 Good Guys stores and three dedicated distribution centers within the next 60 days following liquidation sales.

The remaining 12 megastores will eventually be rebranded as CompUSA.

Going forward, CompUSA will use the Good Guys brand within select stores as the name for expanded home entertainment departments. The enhanced A/V sections debuted last week in 38 pilot stores in California and Hawaii with added brands, SKUs and square footage.

CompUSA acquired Good Guys in December 2003 in a cash-for-stock deal valued at $55 million as an entrée into the A/V market. The company began consolidating the 71-store chain earlier this year by closing some locations and converting others into the new megastore format, which combines Good Guys’ A/V assortment with CompUSA’s IT offering.

Good Guys was founded by Ron Unkefer in Alameda, Calif., in 1973 with a $5,000 loan from a friend. Fueled by a public offering, the company later embarked on an aggressive build-out strategy that carried it into the adjacent Oregon, Washington and Nevada markets. But increased competition from discounters including Best Buy, Fry’s, Costco and Wal-Mart, plus growing pains from over-expansion, led to years of declining sales, earnings and traffic that neither Unkefer nor his successors Robert Gunst, Ken Weller or CompUSA could reverse.

In a statement, CompUSA’s president/CEO Larry Mondry noted that "The need for stand-alone, high-end home entertainment retailers is declining … as home entertainment products become more prevalent among consumers."

According to CompUSA’s chief marketing officer Phil Jacobs, research links the decline of the regional A/V specialty channel to the convenience and increasingly more sophisticated CE assortments offered by mass merchants.

Jacobs told TWICE that the concept of combining Good Guys’ and CompUSA’s assortments under one roof proved successful in tests of the megastore format, and that the company decided to go into the holiday selling season with a more focused branding strategy.

The new Good Guys departments will comprise 10 percent to 20 percent of the targeted CompUSA stores, and will feature premium A/V products by such traditional Good Guys vendors as Pioneer, Sony and Bose. The branded-shop concept, which mirrors Best Buy’s in-store Magnolia strategy, has received the support of the vendor community, Jacobs said, and will benefit from enhanced economies of scale.

CompUSA, which is privately held by Mexican billionaire Carlos Slim Helu and his Mexico City-based company Grupo Carso, will await results of the 38-store test before deciding whether to expand the Good Guys department concept to other markets.