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Good Guys’ Weller: Economy Not Cooperating With Turnaround

TWICE:So what’s up with Good Guys?

KEN WELLER: We had good and bad news. The good news is we are in California, and the bad news is we were in California last year.

It was tough. I am trying to reposition the company where our strategy is to focus on the top half of the consumer electronics industry, we are closer to Tweeter and Ultimate on the type of customers we are profiling.

While we are disappointed with the results, we had some signs along the way that things were going pretty well for us. We have about 60 percent digital product now, which is a very large improvement over the last eighteen months for us. Our margins are going up. Our in-store execution is going up. But we are paying the price for our geography — our core business is really 60 stores in California.

So sometimes you wonder, ‘Are you really doing the right thing? Is this the right strategy, and is this a case where you’ve got to stick to what your core competency is and wait for the economy to turn?’ And I think when the economy turns, we will be right there.

We also announced we were going to close eight stores. There were a number of real estate deals done during the mid-’90s in demographic areas that we probably shouldn’t be in. So part of the store closing strategy really is in line with what we are doing as a company to super-serve the top half of the consumer electronics industry.

People had sort of different views of this — ‘Oh, okay, what does this mean, you’re closing stores?’ But I see this as a continuation of what we are doing.

TWICE:How long did you and [founder] Ron Unkefer think it would take to turn the company around?

WELLER: Well, it was the only thing that Ron and I had a big disagreement on. The day I returned I said it’s going to take us four years. You know, you go to business schools at Stanford and Harvard or Oxford, and they will say, look, retail turnarounds take four years. And Ron said, ‘Don’t tell me that, don’t tell me that.’ I go, ‘Ron, it’s four years.’

And quiet honestly it has proven to be correct, and I would typify where Good Guys is right now in the turnaround cycle as the start of the third or fourth year.

And yet we are incredibly resilient. I mean, this is a company that hasn’t made any money for five years. I shouldn’t boast about this, but, boy, the morale in the company is just tremendous. We’ve got a group of people that are really dedicated to making this thing work. So that’s the good news. If anybody could just help with the economy, I think we would be one of the main beneficiaries of that.

TWICE:Your prototype store in Beverly Hills is striking. How is it performing?

WELLER: It is different, it really focuses on lifestyle, and I am sure a lot of the industry will go through that store. The initial read is pretty good. And the great news is it wasn’t terribly expensive. All of us have all done remodels at various times and with varying success, but the ROI on it is not always great. Sometimes they look beautiful and they don’t work, and sometimes they don’t look so great and they do work.

I think we’ve got something here that doesn’t seem very expensive, looks great and works. But only time will tell. I have been very cautious and conservative in my comments. My view of these things is that you really need a six-month window of time to get an indication of where the successes are.