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Tweeter Said To Have Shut Dist. Centers

11/03/2008 02:00:00 AM Eastern

Tweeter planned to close all of its distribution centers by last Friday in a move described by management to employees as saving up to $12 million per year, according to various industry sources.

Under the plan, suppliers would ship directly to stores.

"This is a measure that will help them to survive and move forward," said one marketer who spoke to Tweeter employees. "This is not being positioned as a liquidation move."

While several vendors contacted by TWICE declined to go on the record concerning the report, they did confirm aspects of the story and were skeptical of management's explanation. They said it was an unheard of move for any type of retail chain with Tweeter's store count and store sizes. These vendors feared the warehouse closings were a precursor to liquidation.

Tweeter management and store managers declined to comment or didn't return calls from TWICE on this story at press time.

In the days before the closings, some Tweeter vendors said they were unable to contact chain management.

Two marketers, however, thought the move was a plausible way to cut overhead and could work. "Most stores are over-built," one of the marketers said. "Today's environment does not require Tweeter to have 10,000- to 20,000-square-foot stores. Also, their car-install business is only a shell of its former self, so my guess is that there are plenty of spaces to [store] whatever hodge-podge of inventory they want. I would also guess they don't have a lot of inventory." The chain also uses distributors to supplement its need, the marketer said.

Another industry executive pointed out that it ships products to "hundreds of little guys," although "it costs a lot of money." For vendors, shipping to individual Tweeter stores via UPS and Fed Ex rather than via truck to a central warehouse "would be an additional expense for vendors, unless Tweeter pays the freight," the marketer said.

One long-time retailer is skeptical that Tweeter intends to cut costs. "You don't ship inventory out [to stores] unless you're ready to get rid of everything," he said. In fact, an employee at one Tweeter store acknowledged last Thursday that the chain was sending email invitations to past customers to participate in a special sales event over the weekend.

The closings followed the recent departure of Tweeter CEO George Granoff in October after 13 months. After Granoff left, Tweeter owner Schultze Asset Management Group brought in Craig Boucher, a corporate restructuring expert, to run Tweeter on an interim basis. Schultze bought Tweeter for $38 million in a bankruptcy auction last year. 

Clickhereto read TWICE's complete coverage of Circuit City and Tweeter.

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