The list of the departed and walking wounded consumer electronics retailers in my home area — generally referred to in the media as “affluent suburban Westchester, N.Y.” — had a major expansion recently.
It followed the announcement by Cablevision that it was going to close 26 unprofitable The Wiz stores, leaving it with 17 moneymakers.
The announcement both was and wasn’t a surprise. On the was side, it came just a few weeks after the publication of TWICE senior editor Alan Wolf’s interview with Jeffrey Yapp, Cablevision’s president of retail operations. Yapp was the newest of several executives brought in to turn around the fortunes of the flagging specialty chain.
In that interview Yapp indicated that Cablevision was losing patience with its retail operation, and said a “restructuring” was on the way. But he said it would be in the way The Wiz does business, with a revamped, more consumer-friendly store format and policies. There wasn’t a word about store closings.
As for the no surprise part, in a column of mine that appeared earlier this year I noted that, including the total writedown of its original investment, Cablevision had lost more than $400 million from The Wiz operations since its acquisition in 1998. That was up another $40 million in the first half of this year.
Yapp, in his interview, acknowledged that Cablevision wasn’t going to support such deficits forever, and his job was to put a stop to the financial hemorrhaging by this year’s final quarter.
Part of the blame for the losses is generally assigned to the invasion of first Circuit City, and later Best Buy into several of The Wiz’s local markets. But those losses were piling up even before the arrival of those two power retailers.
The question now is: Will the reformatting of the remaining Wiz stores produce, if not actual net earnings, at least a break-even year-end quarter? One problem The Wiz faces is its drop in order volume. Will the orders it places for its 17 stores give it the same low prices it could negotiate as a 46-store operation?
Another question, of course, is the state of the market. The combination of VCR, analog TV and DVD retails at historic lows and flagging consumer demand make this an inauspicious time for a retailer seeking to straighten out its bottom line.
And this doesn’t even take into account the stepped-up competition for what action there is from The Wiz’s two giant national competitors and the large regional P.C. Richard chain. Richard’s answer, by the way, to having Best Buy open four doors down in the same shopping center is to start construction of a new superstore a half mile down the road.
On top of all that, now comes a statement from Cablevision CEO Charles Dolan that he would consider selling the company’s cable TV operation. Considering that the sole reason for purchasing The Wiz was that there would be a synergy between the two — with the chain selling cable modems and related services and Cablevision promoting the stores — a sale of the cable business would leave no reason to continue supporting The Wiz.
While the general view in the financial community was that Dolan was just sending up a smoke signal, and has no real intent to sell, the fact that he did it at all casts further doubt over the strength of Cablevision’s commitment to retailing.