Back in the CEO saddle he left more than eight years ago, The Good Guys founder Ron Unkefer is taking immediate, and dramatic steps to turn the financially flagging chain around, including discontinuing PC and many other home office products, reducing staff at the corporate level and putting a hold on store expansion and remodeling.
Unkefer, who launched The Good Guys 26 years ago and relinquished management control at the start of 1993, ended a four-year retirement, effective July 1, by reassuming the post of chairman and the responsibilities of Robert Gunst, who resigned as president. As part of his return, Unkefer reacquired a 10% stake in the chain with a $4.7 million investment.
The initial steps in Unkefer's revitalization program were announced along with results for the quarter to June 30, showing The Good Guys with a loss for the period of $8.13 million, up sharply from the year-earlier deficit of $2.59 million. Sales, at $210.5 million, edged up 0.7%, and same-store sales were down 2%. For the first nine months of fiscal 1999 the specialty retailer's loss ballooned to $13.7 million from last year's comparable $2.18 million, while sales increased 2.1% to $723.6 million. The Good Guys, which had a $26 million loss in fiscal 1998, hasn't shown a full-year profit since 1995.
To turn the chain around, Unkefer said in a prepared statement, "We are aggressively reducing our operating costs and eliminating unprofitable line," and putting emphasis on "digital and high-tech consumer entertainment electronics." A major step toward that end, he said, "will be the elimination of computers and home office products" from the sales floor by the end of this quarter.
"The expected synergy from computer sales and entertainment electronics sales has not materialized," he said. "Minuscule computer industry margins, quick obsolescence of inventory and unique service challenges have collectively made this category a financial drain on the company." At least part of the space and funds freed as a result, he said, will be used to expand the wireless phone business and create a new department to showcase new technology and Internet-related products and services.
With a goal of cutting annual overhead costs by 20%, or some $8 million, Unkefer said management functions have been consolidated, two VPs posts have been cut and the real estate department closed. While none of the chain's 79 stores are being shuttered, Unkefer said he has canceled all plans for additional store remodels and relocations and will not open any new stores until the company is back in the black. He said the costs, and business lost, from relocating or remodeling seven stores in the current fiscal year "contributed significantly to this year's losses, but these stores should help drive sales in the coming year."
On the other hand, Unkefer said, he plans to increase the company's ad and marketing budget by more than 20%, and said the new agency charged with developing the upcoming image-enhancing campaign, Citron Haligman Bedecarre of San Francisco, will take an equity interest in The Good Guys.
Unkefer also said that due in part to upcoming restructuring charges, "We aren't looking for an improvement in our financial performance in the fourth quarter, but are encouraged that our plan should return us to profitability during fiscal 2000." He said the company is looking to achieve same-store sales gains in the next fiscal years, but noted that the changes in cost structure and product mix "should make the company cash flow positive in fiscal 2000, even if same-store sales are flat."