Tops Appliance City, the 10-store New York metro area specialty chain, is moving out of personal computers, peripherals and some small CE products to concentrate on the higher-margin majap, housewares and kitchen cabinet categories.
Tops began scaling back its participation in the PC sector earlier this year to help staunch ongoing earnings declines. Besides computers, the store is also dropping cameras, video software, car stereos, microcassettes, clock radios, office furniture and other items. "We have this crazy assortment, and we're dropping a lot of the peripheral items," explained CEO Richard Jones.
Tops intends to liquidate its inventory of discontinued products over the remainder of its current calendar year, and Jones assured the local electronics community that "we won't be causing undue heartaches. We'll exit those categories in a pretty orderly fashion."
As it shifts to a narrower assortment, the store will also consolidate its vendor roster -- affecting other CE categories including video -- and on Dec. 1 will reduce its workforce by an unspecified number of employees. Jones also left the door open to the possibility of store closings, but noted that "none have been announced right now."
In lieu of electronics, Tops will focus on major appliances and will dramatically expand its housewares business, which was broadened to include tableware, dinnerware and glassware. Those categories complement its kitchen cabinet and countertop operation, which was recently formalized with the rollout of Kitchen Place departments.
Jones said the new product mix is expected to bring improved margins and reduced SG&A and interest expenses. "With major appliances and housewares having made strong contributions to our operating results, we believe that devoting more attention to these categories will provide us with margin improvement and greater shareholder value," he said.
Jones acknowledged that another impetus for the strategic shift is the impending arrival of Best Buy to the New York market next year. "That had something to do with it, and Circuit City being here had something to do with it," he said.
With this move, Tops joins the growing ranks of consumer electronics specialty retailers who are curtailing or abandoning their PC businesses in an effort to improve profitability. Tops reported a second-quarter net of $76,000 against year-earlier earnings of $363,000, while sales, at $73.5 million, were off 1.3%. For the first half, the retailer's net loss mushroomed to $5.34 million from last year's $1.32 million, and sales of $135 million dipped 0.5%.