In the second similar action by an industry retailer this year, the N.Y. Metro-area Tops Appliance City today voluntarily filed for Chapter 11 protection from creditors in the Newark Federal Bankruptcy court. The filing came in the wake of the closing by Tops of three stores and was quickly followed by a Nasdaq-ordered suspension of trading in Tops shares.
The Tops move was preceded this year by the voluntary Chapter 11 petition filed in January by the Dayton-based Roberds chain (see TWICE Online coverage).
In an announcement, Tops said its filing "was precipitated by increased operating expenses associated with its 3 stores in Manhattan and Brooklyn and lower than expected sales in the fourth quarter of 1999 during the company's implementation of its operating strategy to phase-out the sale of consumer electronics." Tops said the store closings were made to "to streamline operations and to focus on its remaining 5 most profitable stores," four of which are in New Jersey and one in a New York suburb.
Last October Tops announced it was discontinuing the sale of all consumer electronics and home office products, which traditionally represented less than 20 percent of its sales volume, to concentrate on sales of large and small appliances and on its new kitchen remodeling business. In keeping with that, it began a store remodeling program and phasing in a name change to Tops Home Appliances. Also at that time it announced it was selling the leases on three of its New Jersey stores to Best Buy.
Tops has been having earnings problems for some time. In the last five years its sole profitable year was 1997 when it earned $1.36 million, but only after a net gain of $8.5 million on a debt-for-equity swap. It promptly dropped back into the red in 1998 with a net loss of $1.13 million, and through the first nine months of 1999 was showing a deficit of $5.74 million.
Top's growing financial woes presumably stem from the increased level of competition in its market area coming in large part from the multi-store entry by Circuit City. The competition will be getting even more intense this year as Best Buy moves into the region and Home Depot, which has been opening stores in the area at a rapid pace, adds a broad range of major appliances to its inventory as a way of bolstering its extensive kitchen remodeling business.