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Good Guys Turnaround In Full Swing

For a company named Good Guys, it looked like the competition were beating them pretty regularly during the last few years, and were going to win.

The chain, based in the northern Californian town of Alameda and known for introducing and selling cutting-edge CE products since 1973, seemed to have lost its way during the last several years. It followed a familiar CE retailing pattern of going public, implementing aggressive expansion plans, followed by a few years of losses as well as rumors of its demise and/or acquisition by a stronger competitor.

Founder Ron Unkefer left the company, came back in 1999 to try and straighten things out, left again in January of this year, and is still the chain’s largest stockholder. In the interim he brought back in 2000 from an extended stay at Best Buy, Good Guys’ veteran Ken Weller as president. Weller succeeded Unkefer as chairman and CEO upon the latter’s departure.

Weller was candid at the TWICE Retail Roundtable, held during International CES in January, when he said, “Well, the only thing that Ron and I had a big disagreement on was this: The day I returned I said it’s going to take us four years. You know, you go to business schools at Stanford and Harvard or Oxford, and they will say, look, retail turnarounds take four years. And Ron said, ‘Don’t tell me that, don’t tell me that.’ I go, ‘Ron, it’s four years.’ And quite honestly it has proven to be correct … Good Guys is right now in the turnaround cycle at the start of the third or fourth year.”

For Weller, Unkefer and the rest of Good Guys, a light can be seen at the end of the tunnel, and it isn’t a locomotive making its way towards them. Things are turning around.

Cathy Stauffer is another Good Guys alum from 1977 to 1993 who returned in 1998 and is now executive VP/merchandising and advertising. As she sat down with TWICE at the CEA Industry Forum and Fall Conference recently at the Fairmont Hotel, here, Stauffer was able to discuss the possibility of Good Guys posting a profit for the first time in four years. For the fiscal second quarter ending Aug. 31, the chain’s net loss was $1.8 million, down from a $4.5 million loss in the year-ago period.

Stauffer told TWICE about some of the challenges Good Guys is trying to meet in this difficult economy and how it is beginning to succeed.

How have sales been during the first six months of the year, and since the summer when business seemed to slump for everyone in CE?

For the first six months of the year sales were flat vs. last year, but we held our own in the summer, especially during August.

Southern California has been strong for us, but Silicon Valley has been more difficult. Still, you must remember that California is the fifth largest economy in the world. [Northern California] still has a big appetite for consumer electronics and new technology. We sold 500 plasma TVs each month during August and September. That demand is consistent with California’s early adopters.

The company’s losses have narrowed, especially in your last quarter. How have you been able to do that and what is your chain’s financial prognosis now?

Last year we lost $40 million. We closed stores and we projected conservatively, saying we would have a flat to a slightly down year. Yet we have reduced the cost structure of the company. If you can do that now, when sales are sluggish, when sales really grow our potential is enormous.

How have suppliers reacted to your plans and performance

We have done a good job communicating our business model to our vendors, so they know what we are doing and what we are planning. We have been very proactive with our business partners so they know exactly what we are doing.

How has the economy affected consumer-buying patterns?

The stock market and all the news driven by market performance have affected consumers. Many people have decided not to take vacations, where they could spend $3,000, $4,000 or more. Instead many are buying a plasma TV, which unlike a vacation, is an indulgence you can use every day.

Wal-Mart has decided to enter the HDTV business in 1,500 stores. How will that impact the category and Good Guys in particular?

This broadens the awareness of HDTV to everyone. It is surprising that Wal-Mart is rolling this out to 1,500 stores with a [limited] test. How will they handle their customers’ questions? What will they do about service and delivery?

Good Guys opened a store in Beverly Hills to really test new store designs and new ways of merchandising. How are you going to roll that out to other stores in the chain?

If you enter any consumer electronics store over the year you’ll see hundreds of TVs on the wall. See them all at once and they will overwhelm the consumer. We decided to make sure each product, each category, receives more identification, more signage to explain the products, and have more focused displays.

Some consumers don’t want to enter the store and admit that they need good advice, or that they haven’t researched everything on the Internet. They want information, but they also want to experience the products.

We are not rolling out the entire layout of the Beverly Hills store [across the chain]. What we want to do is take bits and pieces of what works there and use it where it can work. We want to pick the best freestanding displays in personal electronics, plasma TVs — displays that can “walk and talk” consumers through the products.

Specifically in TV, what changes are you making?

Well, in regular big-screen TVs we have taken down those two-tiered displays to one level. How can you look up there and compare performance? We will retrofit the projection TV displays [in the next few months].

And finally, you closed seven stores, as you were able to correct the chain’s cost control. When will the time be right to consider expansion again

There were stores we opened in the past that we shouldn’t have been in the first place. We closed seven and took another location and made it a clearance center. We won’t expand until we are profitable, and we will be profitable by the end of the year. There are opportunities in markets we are in, so we could fill in there with some stores.