CompUSA Develops New Strategy - Twice

CompUSA Develops New Strategy

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CompUSA has unveiled a sweeping strategic plan designed to return the ailing computer superstore to profitability.

The company said it would overhaul the business by moving away from its PC focus, redesigning its stores, cutting 5% of its workforce and shutting upwards of 14 locations. The strategic shift follows a $5 million third-quarter loss attributed to slow sales and falling PC prices.

The new merchandise assortment will emphasize hand-held technology, including PDAs; entertainment software; interactive toys requiring a PC; and digital products including DVD players and movies, MP3 music distribution technology, and digital and conventional cameras and camcorders.

The company said it will also "aggressively grow" its CompUSA brand PC business by giving it a dedicated sales force, more floor space and increased advertising support.

To accommodate the broadened product focus, the chain is testing new store layouts and designs, including new floor configurations for expanded gaming, imaging and mobile computing departments, and a variety of in-store presentations, including an individually staffed custom PC center.

To reduce operating costs, four stores have been marked for closure in the near future, and five to ten additional locations may follow suit, while 1,000 to 1,500 employees will be terminated out of a total workforce of 21,000.

CompUSA CEO James F. Halpin described the new game plan as a fundamental redefinition of the company's entire business concept, and a shift away from its recent strategy of rapid growth.

Acknowledging that the superstore had been "concentrating" on last summer's acquisition of Computer City from Tandy, he noted that "We are shifting our focus to improving the operations of every aspect of our company. We believe this focus will restore our financial performance by increasing gross margins, reducing operating costs, improving customer service and capitalizing on strategic growth opportunities."

Other remedial steps include centralizing distribution to one location for direct sales customers; outsourcing its direct sales and integration businesses to a distributor; streamlining its training services by moving from a store-level operation to a market-based structure; outsourcing high-end computer integration services; and taking over its extended warranty repair call service from third-party provider Warrantech.

With 211 superstores, CompUSA is the nation's largest computer specialty retailer, ranking third on TWICE's Top 100 Retail Registry with 1998 CE sales of $5.8 billion.

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