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Tweeter Sees Home-Install Boom Coming

NEW YORK — Tweeter Home Entertainment Group expects that its custom home-installation business will add $800,000 to $1 million in sales to each of its stores over the next three years. “This will be a big business for us … we plan to capitalize on new technologies in digital products,” Jeff Stone, president/CEO of the Canton, Mass.-based audio/ video retailer told analysts at the PaineWebber 11th Annual Growth & Technology Conference here last week.

Along with Tweeter, Office Depot and Lowe’s made presentations to analysts brought together for a close-up look at retail trends. RadioShack’s Leonard Roberts also spoke.

“We’re in the midst of a digital products explosion,” Tweeter’s Stone told analysts, “pushing the $33 billion consumer electronics business to a 5.3 percent growth rate last year and 5.5 percent this year.” Tweeter, which said it averages 36 percent in gross margin in its 10,000-square-foot stores, does about 25 percent of its business in digital. Product overlap is about 50 percent with Circuit City and 18 percent with Best Buy, Stone said about the chain’s mix.

Tweeter continues in its acquisition mode, growing to a current 84 stores following purchase of United Audio Centers in Chicago, Home Entertainment in Texas and Dow Stereo/Video in San Diego. The Dow units will take the Tweeter name.

Tweeter expects to have 94 units by the end of 2000 and 22 new stores in 2001. “We’re talking about more acquisitions, we’re evaluating three different people. It could be this year or next,” Stone told analysts about Tweeter’s buying plans. “We want someone who looks like us, feels like us, which we can run up or down [in size].”

Furniture and technology products are expected to be the leaders at Delray Beach, Fla.-based Office Depot, providing opportunities for the retailer to improve its overall business, said David I. Fuente, chairman/CEO of the office products chain. “We’ll still serve businesses and home offices, but we’ll expand assortments and services,” he told the analysts.

Office Depot, which does 55-60 percent of retail sales in technology products, said its recent shortfall in numbers can be attributed to slowing sales in computers and printers, not supplies – “and the shortfall is in stores, not our catalog business,” said Fuente.

Nevertheless, he added, “our format of superstores will continue to take share from traditional distribution. Sales are growing at a faster rate than the industry, but the rate of change is slowing. To accelerate this again, it’s not going to be store format that takes share, but working store, contract and sales together.”

“We’ll be working on our warehouse productivity and efficiency; our international infrastructure, namely European websites; e-commerce growth, where we are doing $800 million in sales; data warehouse; and being the low-cost provider,” Fuente said.

Better cross-merchandising and a shift to higher-end products is the game plan for Wilkesboro, N.C.-based Lowe’s Companies. “We expect to do a big job with installation sales, including appliances,” said Dale C. Pond, executive VP for merchandising and marketing at the home-improvement retailer.

Lowe’s also claimed the No. 2 position in major appliance sales, telling analysts here that the chain is now second only to Sears in white-goods sales, according to Robert A. Niblock, senior vice president for finance. Lowe’s was ranked third to No. 2 Circuit City in 1998 figures found in TWICE’s most recent Top 100 Major Appliance Retail Registry, moving up from No. 5.

Lowe’s will be narrowing its breadth of product and increasing depth, Pond told analysts. “We’re going to wean off the low end, moving more to the middle and top-of-the line. KitchenAid is one example.”

As for consumer electronics, which Lowe’s dropped last year, Pond said, “It was a wise decision. It never made good sense to our mix. Now, we make more money.”