WAYNE, N.J. — Electronics Expo, the northern New Jersey A/V specialty chain, filed for Chapter 11 bankruptcy protection on Easter Sunday, blaming stricter vendor pricing policies and delayed instant-rebate credits for its woes.
According to documents filed last week with a federal bankruptcy court in Newark, new MAP and UPP strictures by Expo’s biggest TV suppliers — plus limits on which lines and models can be sold through third-party websites — led to declining revenue and cash flow and growing operating losses beginning in 2012.
President/CEO Leon Temiz said in court papers that the chain was also impacted by vendor delays in issuing credit for instant rebates, which tied up his company’s working capital and choked cash flow.
Compounding the problem was a sharp decline in vendor promotional support as TV manufacturers contended with steep losses of their own, he said.
Temiz acknowledged in the filings that Electronics Expo’s business model was based on aggressive promotional pricing, and that Amazon.com is a significant sales channel for the chain.
The vendor clampdowns, which were designed to restore profitability to the video business and level the playing field between e-tailers and traditional dealers, led to mounting operating losses for Expo, which reached $2 million last April and May.
Temiz responded by closing four unprofitable stores and laying off 200 of his 230 employees, which helped narrow losses to less than $200,000 for September and October. But unable to float the working capital between rebate credits, he also slowed payments to vendors and aggressively took deductions he believed he was owed. This prompted a major credit insurer to cut off the company, which led to the Chapter 11 filing.
The business, which is almost entirely owned by Temiz, operated eight showrooms at its peak in 2008, but ended 2012 with two stores, a clearance center and $63 million in revenues.
According to court documents, the company has assets of nearly $3 million and liabilities of $7.4 million. Its chief creditor is Samsung, with an unsecured claim of more than $1.06 million. Other major creditors and their unsecured claims include Panasonic, $986,309; LG Electronics, $851,120; distributor Tech Data, $729,304 (for Sony merchandise); Denon, $478,956; Sharp, $429,949; Yamaha, $332,694; Canon, $218,527; Polk, $199,990; and Klipsch, $132,104 .
Other creditors include Amazon.com, eBay, GE Capital, and Electronics Expo’s executive VP Rich Yanitelli.
Temiz founded Electronics Expo in 2003 after leaving Sixth Avenue Electronics, the now-shuttered New York area A/V chain that he ran with his brothers Billy and Mike.
In recent years Temiz attempted to shore up his ailing TV-centric business by focusing on custom installation and system integration, creating live in-store connectivity displays, opening an adjoining food franchise at its headquarters location here, and shifting sales online while searching out smaller showrooms.
Going forward, the company hopes to “continue providing high-quality goods and services to its customers, while at the same time reducing costs and improving sales” while it restructures. Temiz said he is actively pursuing a number of cost savings initiatives, and has changed his go-to-market strategy from unsustainable low-margin “box turning” lines to higher-margin, solution-oriented sales. A series of bankruptcy hearings were scheduled for last week.
Electronics Expo remains an active member of the Progressive Retailers Organization (PRO Group), a division of the ProSource and BrandSource buying groups. David Workman, president/ CEO of ProSource and president/COO of PRO, said only a change in ownership or control of the company would require it to re-apply for membership.
Regardless, “The group will do everything in its power to support Expo’s efforts to refashion their business to the current market,” Workman said.
— Additional reporting by Steve Smith