CompUSA will shutter 126 locations over the next two to three months, representing more than half of the retailer’s 229-store base.
The closures are part of an ongoing restructuring at the struggling IT chain that includes a management shakeup, widespread layoffs and a $440 million cash infusion to buoy the company’s balance sheet.
In a statement, CEO Roman Ross said, “Based on changing conditions in the consumer retail electronics market, the company identified the need to close and sell stores with low performance or non-strategic, old-store layouts and locations faced with market saturation.” He said the closings will allow CompUSA to focus on initiatives that maximize margins in its top-performing stores.
The closures began last month with the shutting of four CompUSA locations in California, Illinois and Texas, and will ultimately leave the chain with 103 stores in 39 states and Puerto Rico. The company will exit the states of Minnesota, Mississippi, Missouri and Nebraska entirely, while New Jersey and Michigan will be left with one location each. Liquidation sales have already begun, and are expected to last for 60 to 90 days. At least four regional offices are also expected to close.
Ross said the comprehensive restructuring was designed to improve the company’s financial performance and enhance its competitive position in a challenging retail marketplace. The sweeping initiative includes slashing expenses, streamlining store operations and realigning its executive leadership team.
As part of the management overhaul, chief merchant Brian Woods left the company and has been succeeded on an interim basis by recent hire Gabriela Villalobos, who was promoted to sales and operations executive VP. Villalobos will be responsible for store, services, small business and online sales, and will temporarily oversee merchandising and marketing. Her expanded role is intended to “improve structure and accountability,” the company said.
Other senior-level departures included the company’s chief information officer, Cathy Witt, who was part of a major workforce reduction at CompUSA headquarters last month. The company did not disclose a headcount of the corporate and field personnel affected by the downsizing.
In unrelated actions, chief financial officer Todd Whitbeck accepted a position with another company prior to the restructuring and was succeeded by Mike Bryk, formerly finance and accounting VP. The chain’s general counsel also left prior to the reorganization to pursue other opportunities.
“We understand that our company must make comprehensive changes to better compete in today’s marketplace,” Ross said in a statement. “Our realignment strategy addresses the steps we must take to increase profitability in the current retail landscape.”
Corporate parent Grupo Carso SA, based in Mexico City, reportedly issued $440 million in new shares through a holding company, U.S. Commercial Corp., to fund the capital infusion.
Analysts see the closings as a positive for CE and office supply retailers and PC vendors that sell direct. Matthew Fassler of Goldman Sachs estimates that some $1.4 billion in revenue will now be up for grabs, albeit low-margin volume commensurate with CompUSA’s PC-intensive mix. He projects that Best Buy will likely pick up a third of the business — roughly $400 million to $450 million, or just over 1 percent of its annual sales — while Circuit City may grab 15 percent, or approximately 1.5 percent of its total revenue. He estimated that Office Depot, OfficeMax and Staples could each capture 5 percent of CompUSA’s relinquished volume.
Going forward, Fassler believes that the cash infusion should keep the remaining 103 CompUSA stores solvent.
CompUSA has been struggling for several years to find a game plan within the commodity-driven PC market, including an ill-fated effort to enter the A/V category by acquiring the now defunct Good Guys chain. The company’s struggles were reflected in Ross’ appointment last August as its third chief executive within a year, and in reports that Grupo Carso principal Carlos Slim Helu had hired Credit Suisse Group in September to shop the retailer to private investors.