Tops Appliance City, one of the leading electronics and appliance chains in the New York metro area, has decided to drop out of the consumer electronics category completely and lease three of its locations to Best Buy.
Tops, which said earlier this month that it would move out of PCs and some small CE products (TWICE, October 11) said it would get out of the category completely by the end of the year. That news was part of an announcement about a new store format that will be selling higher-margin major appliances, housewares, kitchen cabinets and counters.
Here are the details on the new format and the Best Buy leases:
- Two newly formatted Tops stores will be opened by the end of the year. Tops intends to operate 20,000- to 25,000-square-foot stores in its current marketplace and anticipates expanding further into the mid-Atlantic region "over the coming years," the chain said. Currently, Tops locations average 50,000 square feet, with about 15,000 square feet devoted to major appliances and housewares. A new advertising campaign highlighting the move will be launched in November. The company currently is negotiating five new leases and is seeking additional locations that will better match the new format, Tops said.
- Best Buy will take over leases in Union, East Hanover and Secaucus, N.J., of three Tops locations, which range in size from 45,000 to 50,000 square feet, for $10.5 million. The new Best Buy locations are in addition to five leases the chain signed in Westbury, Bay Shore, West Nyack and Kingston, N.Y., and Woodbridge, N.J.
Tops has begun negotiating the sale of some of the other existing store leases.
Tom Zambelli, Tops executive VP/CFO, said the decision to drop out of the CE market completely was in discussion during the past three months. "This was a combination of a new opportunity and the increased competition in consumer electronics with the arrival of Best Buy and Circuit City to our region," he said.
Richard L. Jones, Tops president/CEO, said in a prepared statement, "Our new retail store will create what we believe will be a real category killer, the first home appliance and kitchen superstore in the marketplace." He added that the emphasis will be on high-end products, but its selection will include moderately priced goods.
As part of the changes at Tops, the company said it will open 10 to 15 new stores in the New York metropolitan area, increase gross margins by over 200 basis points, and reduce SG&A expenses by 50%. In addition, there will be layoffs, but Zambelli said Tops has not yet decided how many.